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DP World launches infrastructure report at Africa Global Business Forum
Infrastructure development to lead foreign investment says DP World Chairman
A five point plan to help tackle Africa’s infrastructure gap is among the findings of a new DP World report to be unveiled at the Africa Global Business Forum this week.
Public private partnerships, domestic bond financing, monitoring the life cycle of infrastructure by maintaining and upgrading existing stock, enhancing trade integration and improved trade facilitation are key point raised in the study “Africa at the Crossroads: Bridging The Infrastructure Gap”, produced in association with the Economist Intelligence Unit.
Over the past decade, investment in African infrastructure has risen sharply and some notable projects have been completed, but despite the impressive flow of projects and policy reforms, the continent’s infrastructure development has failed to keep up with the average annual GDP growth of 5%. The development of “soft” infrastructure, such as the legal and regulatory frameworks that enable physical infrastructure to be built and maintained, has also fallen short of requirements.
The report traces the continent’s strong economic growth in recent years and highlights how infrastructure development has not kept pace, placing an increasing strain on existing infrastructure assets.
To overcome infrastructure deficits on the continent, as much as $93bn will be required annually (approx 10% of African GDP), with only half of that amount currently available the report explains.
Speaking on behalf of DP World, chairman H.E Sultan Ahmed bin Sulayem said; “African countries need a solid foundation on which to place the building blocks of their economies. Both soft and hard infrastructure is needed, which will determine how quickly physical assets are built and how quickly trade develops.
“Our ports in Africa have shown us how the region has enjoyed strong growth over the last 10 years, leading to rising incomes, falling poverty and a step toward economic diversification. However, all this has also placed an increasing strain on existing inland and marine infrastructure. If Africa’s countries and regions were better connected, market sizes would increase and encourage greater foreign investment.”
Yet while Sub-Saharan Africa currently spends around $6.8bn per year on paving roads, this figure needs to be closer to $10bn.
H.E Bin Sulayem stressed the significance of the Public-Private Partnerships (PPP) model, explaining how several African governments have already started to design policies to accelerate infrastructure projects.
Referring to report findings, he added: “PPP’s are an increasingly popular model to fund projects and the regulatory frameworks supporting them are improving. In addition, resource-rich countries are using their commodities as leverage to obtain infrastructure investment. Today, a growing number of the new natural resource contracts that African governments had out have an ‘infrastructure industrialisation’ component – requiring the company in question to invest in new infrastructure.”
DP World has long advocated the power of partnership, having agreements with governments in all six of its ports in five African countries. Africa is a key market in DP world’s network, where it employs over 5,000 people and has established strong community ties, while creating jobs and opportunities for local businesses.
The report also finds that to address the soft infrastructure gap, better internal trade integration is key. One solution to encourage intra-African trade would be to create a pan-Africa free trade agreement, which has already been proposed.
The paper concludes that growth in Africa brings new challenges and current evidence suggests that the African continent is moving at a rate with which its infrastructure cannot keep up. There are encouraging signs of world-class infrastructure delivery on the continent, like South Africa’s Gautrain rapid rail transit system and Kenya’s new railway connecting Nairobi with Mombasa.
Other high impact projects underway could also be game-changers if they can overcome operational challenges. A notable example is the Inga Dam in the Democratic Republic of Congo.
Meanwhile, a range of policies from regional free trade agreements to improved PPP frameworks across a large number of countries are starting to happen, which suggests that the enabling environments for infrastructure development is improving. If momentum can be maintained and accelerated then it could help the continent overcome its critical deficits and seize the economic transformation that now lies within its grasp.
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Modi resets India’s Africa strategy
Apart from boosting trade and investment ties, the idea is to present a united front at multilateral forums such as WTO
Four changes or incipient trends were noteworthy at the third India-Africa Forum Summit last month. These spell out the contours of the engagement that India will pursue with the African continent, its constituent countries, and regional organisations, as well as the government’s desire for a course correction in the traditional trajectory of the India-Africa relationship.
In the first change, a departure from the approach of previous Indian governments, the October event dispensed with the practice of following the Banjul formula, under which only a few African countries participated in the summit.
This time, the government invited all 54 African countries to New Delhi, and among those who came were 40 heads of state. While the shift in policy could be ascribed to this government’s predilection for spectacular optics, it is also true that the multilateral summit gave India an opportunity to engage with each country.
Prime Minister Narendra Modi and External Affairs Minister Sushma Swaraj held numerous bilateral discussions with individual leaders and representatives.
Multilateral negotiations
This extensive bilateral exercise is tied to a second new policy stance – Modi’s push to forge a united front with African nations for a common, but differentiated, negotiating framework in multilateral institutions. In his inaugural speech at the summit, Modi said: “…our global institutions reflect the circumstances of the century that we left behind, not the one we are in today… That is why India and Africa must speak in one voice for reforms of the United Nations, including its Security Council.”
Beyond this, PM Modi has sought African support on two other critical multilateral fronts – climate change negotiations and trade talks. For the first, Modi wants to create a club: “I also invite you to join an alliance of solar-rich countries that I have proposed to launch in Paris on November 30 at the time of the COP-21 meeting.”
A combined front such as this will be necessary when negotiating with rich countries for resources to shift to clean energy technologies because, “the excess of [a] few cannot become the burden of many.”
Modi also wants to align African countries to India’s concerns with the global trading regime. This becomes important given the forthcoming World Trade Organisation (WTO) ministerial in Nairobi in December, where developing countries are likely to make a last-ditch effort to save the Doha Development Round.
The threat comes from developed nations, specifically the US, which in October has signed the Trans Pacific Partnership with 11 other nations and is lobbying to bury the development round.
Modi said as much in his inaugural speech: “India and Africa seek also a global trading regime that serves our development goals and improves our trade prospects. We must ensure that the Doha Development Agenda of 2001 is not closed without achieving these fundamental objectives. We should also achieve a permanent solution on public stockholding for food security and special safeguard mechanism in agriculture for the developing countries.”
India’s desire to construct a common bargaining platform is probably driven by the embarrassment of July 2014, when it was isolated while blocking the Trade Facilitation Agreement at WTO’s General Council meeting. India’s other attempts to get developing countries on board – to provide Duty Free Tariff Preference (DTFP) to least developed countries on 98 per cent of its tariff lines, including in services – have also produced mixed results, prompting the government to now fast-track the entire scheme.
The third outcome is a public acknowledgement of the partial success in implementing India’s marquee development cooperation programmes – concessional lines of credit (LoCs), grants, and capacity building through the Indian Technical and Economic Cooperation Programme as well as the Pan Africa E-Network – and the need to improve the current processes.
Wider engagement
Modi announced enhanced allocations for the programme – $10 billion under concessional LOCs (double the $5 billion announced at the 2011 summit), $600 million of grants, and 50,000 scholarships in India – but also admitted that, “There are times when we have not done as well as you have wanted us to. There have been occasions when we have not been as attentive as we should be. There are commitments we have not fulfilled as quickly as we should have.”
The problem with LOCs is well documented including a widening gap between sanctions and disbursements. In a pre-summit media briefing in New Delhi on October 17, Secretary (West) in the Ministry of External Affairs, Navtej Singh Sarna, gave an update on LOCs: of the $7.4 billion on offer so far, $6.8 billion has been approved and $3.5 billion disbursed. In effect, disbursals are only 51.47 per cent of sanctions.
Both India and recipient African countries are responsible for the low disbursal rate. In India, a multi-tiered and multi-agency framework for sanctioning and disbursing these loans creates delays. Additionally, a non-transparent process causes distortions.
Exim Bank, which finally disburses the loans, has complained to the Prime Minister’s Office about malpractices. On the African side, capacity gaps in drawing up detailed project reports, essential for the Indian side to conduct a proper appraisal, cause delays.
The India-Africa Framework for Strategic Cooperation has promised to introduce a “regular formal monitoring mechanism” to review implementation of projects.
Addressing gaps
The fourth change was the absence of an announcement of trade targets. This was probably necessitated because India-Africa two-way trade has fallen short of the $90 billion 2015 target. But such ambitious targets tend to overshadow otherwise admirable progress in trade relations. In fact, trade between India and Africa has been remarkable.
According to government data, two-way trade touched $72 billion during 2014-15, which is a vast improvement over the $4.5 billion of 1996-97. But interlocutors still need to address some persistent gaps.
One, there is little data in the public domain about the development and progress of projects, especially those under the LOC umbrella or under other initiatives. For instance, there is no report card on the promise to help build 100 institutions that India made during the second India-Africa Forum Summit in Addis Ababa in 2011.
Two, with similar and competing summits being hosted by China, Japan, Turkey, and the US, India should work on upgrading the status of its India-Africa Summit by including sub-fora on labour representatives, think tanks, civil society, academia, and women’s rights groups, in addition to the existing India-Africa Business Forum.
The writer is a journalist and senior geo-economics fellow with Mumbai-based Gateway House
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UNCTAD briefs UN delegates on Policy Framework and WIR 2015
Mr. James Zhan, Director of UNCTAD’s Investment and Enterprise, and team leader of the World Investment Report, briefed New York delegates about the UNCTAD Investment Policy Framework for Sustainable Development and the Roadmap for the Reform of the International Investment Agreements Regime on 12 November 2015.
Presenting the latest trends in flows and policies, he pointed to the importance of foreign investment in closing the financing gap for achieving the 2030 Agenda for Sustainable Development, estimated by UNCTAD to range from $3.3 trillion to $4.5 trillion per year in developing countries alone. Mobilizing investment and ensuring that it contributes to sustainable development is a priority for all countries.
UNCTAD’s Investment Policy Framework has been developed to assist Member States and the international investment-development community in devising strategies and policies to attract and benefit from investment in sustainable development. The Framework has been updated with Member States and other experts to better align investment to the demands of the Agenda 2030 for Sustainable Development.
As acknowledged in the Addis Ababa Action Agenda, the pursuit of the 2030 Sustainable Development Agenda will also require a reform of the international investment agreements (IIA) regime (which currently consists of over 3,300 treaties). UNCTAD’s 2015 World Investment Report: Reforming International Investment Governance offers a menu of options for the reform of the IIA regime, together with a roadmap to guide policymakers at the national, bilateral, regional and multilateral levels. It also proposes a set of principles and guidelines to ensure coherence between international tax and investment policies.
H.E. Mr. Virachai Plasai, Ambassador and Permanent Representative of Thailand to the United Nations, elaborated on his country’s revision of its investment policy. He emphasized that Thailand has used UNCTAD’s Policy Framework extensively, both in terms of enhancing the sustainable development dimension of the countries' inward and outward flows, and its regime of international investment agreements. He noted that investment is a cross-cutting issue that touches on all of the 2030 Sustainable Development Goals, but that this issue is absent from the General Assembly’s agenda.
Ms. Adriana Vargas Saldarriaga, Director, Foreign Investment, Services and Intellectual Property, in the Colombian Ministry of Commerce, Industry and Tourism, explained the revisions to her country’s investment policies and treaties which were based entirely on UNCTAD’s Policy Framework. Referring to the seminal nature of UNCTAD’s Framework, she elaborated on key treaty aspects that were inspired by the Framework, and the country’s new investment promotion strategy that was based on pursuing the sustainable development dimension of investment in line with UNCTAD’s approach.
Mr. Wamkele Mene, Director, Investment and International Law, in the Department of Trade and Industry of South Africa, elaborated on his country’s new investment policy, which was largely shaped by the Framework. He stressed his country’s role in the development of the UNCTAD’s Framework, which had been launched by H.E. Rob Davies, Minister of Trade and Industry, South Africa. Explaining the background to the new South African approach to IIAs, he reiterated his country’s support for the UNCTAD reform path for IIAs, to provide for a better balance between the rights and obligations of investing companies and to ensure agreements do not run afoul of national laws.
Mr. Joerg Weber, Head of UNCTAD’s Investment Policies Branch, added that foreign investment matters for all of the 2030 Sustainable Development Goals, and that for some countries the contribution of foreign investment is key. He stressed UNCTAD’s role in helping Member States in this regard, pointing to various UNCTAD technical assistance products and programmes. He also noted that the issue of investment has been taken up by all international high-level forums, including the ASEAN Summit, the European Parliament and the G20, but not as of yet by the General Assembly and its Second Committee.
Ms. Chantal Line Carpentier, Chief, UNCTAD New York Office thanked all present and invited them to browse UNCTAD Tool Box that includes all the capacity building tools that UNCTAD offers Member States to assist them in putting in place the policies, regulations, and institutional frameworks and in mobilizing the resources needed to fulfil the ambitions of Agenda 2030 for Sustainable Development.
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Recovery in cross-border mergers and acquisitions
Cross-border merger and acquisition (M&A) activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year, the latest UNCTAD Global Investment Trends Monitor reports.
The UNCTAD Global Investment Trends Monitor analyses the most recent trends in cross-border mergers and acquisitions (M&As) and assesses their prospects for 2015. It covers trends in developed, developing and transition economies.
A lull in South-South mega deals dampens cross-border M&A activity in developing and transition economies
The value of cross-border M&A activity, both in terms of purchases and sales, fell in developing and transition economies in the first half of 2015. Net purchases by MNEs from these economies fell 34%, compared with the same period of the previous year, to US$72 billion. The majority of this decline was due to a sharp reduction in the value of acquisitions in other developing and transition economies.
Developing Asia, which was the world’s largest investing region in 2014, registered the sharpest decline in net purchases in 2015. Nevertheless there was brisk activity by MNEs from a number of countries, including Singapore. Large deals included the purchase by a Singapore-based investor group of IndCor Properties Inc (United States) for $8.1 billion and United Fiber System Ltd’s (Singapore) acquisition of a 67% stake in Golden Energy Mines Tbk PT (Indonesia) for US$2.3 billion.
The value of net M&As carried out by MNEs from Latin America and the Caribbean fell sharply (-90%) in the first half of 2015. Their divestments rose to US$8.3 billion, largely as a result of Oi SA’s (Brazil) sales of its Portuguese assets to Altice SA (Luxembourg) for US$7.2 billion. African MNEs registered a similar decline, but the level of their sales was not sufficient to push them to net divestment. A slowdown in large deals carried out by the region’s MNEs contributed to the decline in net value.
MNEs from transition economies have slowed their purchases in 2015. Net purchases by MNEs from the Russian Federation fell 24% to US$866 million in the first six months of the year. These firms have been impacted by the rapid decline in commodity prices, in particular of crude oil, and reduced access to international financial markets.
Key finding of this issue:
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Cross-border merger and acquisition (M&A) activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year. The value of cross-border M&A purchases, which is an indicator of outward FDI flows, rose to US$441 billion, a 136% increase over the same period of 2014.
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Multinational enterprises (MNEs) from developed countries were the principal drivers of the global cross-border M&A trend. European MNEs, after a number of years of high divestment levels, registered a sharp rise in the value of acquisitions in 2015.
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Cross-border M&As carried out by MNEs from North America continued to grow strongly (up more than 100%). Acquisitions by Canadian MNEs reached their highest half-year level. Tax inversions accounted for half of outbound deals by value from the United States, although they represented a small share (10%) of global cross-border M&A purchases.
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After emerging as the largest investing region in the world for the first time in 2014, cross-border M&As by firms from developing Asia registered a decline this year (-27%). Activity by MNEs from Latin America and the Caribbean, as well as from Africa also decreased, reflecting the consequences of depreciating domestic currencies and falling commodity prices.
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The growth of cross-border M&As purchases is projected to slow in the second half of 2015, but the full year value will be well above that of 2014, based on the first ten months of the year. While economic, financial, and structural trends support this forecast, potential downside factors could limit the scale and length of this current wave of cross-border M&As going forward.
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tralac’s Daily News selection: 17 November 2015
The selection: Tuesday, 17 November
Starting today in Dubai: Third Africa Global Business Forum. Twitter updates: @AGBForum
Nigeria’s National Assembly Dialogue on Economy, Security and Development concludes today: access the presentations
The Fourth Congress of African Economists continues: opening speech by Anthony Mothae Maruping
Today: a briefing by SA's trade minister on the Promotion and Protection of Investment Bill
South Africa and US agree on terms for US poultry imports (Reuters)
South Africa has signed an agreement with the United States to resume import of 65,000 tonnes of chicken each year, which had become bogged down over health concerns, the government said on Tuesday. “We are on track to resolving the outstanding issues related to beef and pork. The chicken protocol shows we are moving in the right direction,” South Africa’s Department of Trade and Industry spokesman Sidwell Medupe told Reuters, adding that outstanding issues will be finalised by Dec. 31.
Pakistan to challenge South Africa’s decision in WTO (The News)
According to official announcement made here on Monday, the Ministry of Commerce decided to challenge South African decision to impose preliminary anti-dumping duty (PD) on the import of Pakistani cement in the WTO. During May this year, South Africa imposed various rates of PD on Pakistani cement exports ranging from 15%-68% anti-dumping duty on the import of Pakistani cement. South African government considered that these imports were causing injury to the local cement industry. Pakistan, however considers that these measures by the South African government are inconsistent with several provisions of the various WTO agreement. Pakistan’s Permanent Representative to the WTO Dr. Tauqir Shah has written a letter to his South African counterpart in Geneva for formal consultations. Any dispute at the WTO begins with a request for consultations and the dispute has a minimum of two stages. First is the consultations stage without involvement of WTO secretariat which involves a combination of politico-legal-economic claims. Second is the panel stage, with the involvement of WTO secretariat and is purely based upon legal and economic claims.
South Africa: Citrus industry earns a more favourable EU stance on black spot scare (Business Day)
South Africa, Turkey to boost bilateral trade (Journal of Turkish Weekly)
ECOWAS, IGAD updates:
Stringent border rules impede ECOWAS trade protocols (The Graphic)
Ghana's finance minister, Mr Seth Terkper, has stated that the failure of the Trade Liberalisation Scheme of the Economic Community of West African States to achieve its objectives of economic integration was due to the stringent cross-border barriers of member countries. In his presentation of the 2016 budget statement to Parliament on November 13, the finance minister called for the removal of trade bottlenecks that were impeding the implementation of the ECOWAS trade protocols. “While some progress has been made in reducing tariffs, they have not been fully eliminated. Progress towards removing non-tariff barriers such as seasonal import and export bans has been slower. The failure to implement the instruments on the ECOWAS Trade Liberalisation Scheme is affecting economic growth in the sub-region”, he said. [2016 Budget Statement and Economic Policy of the Government of Ghana]
ECOWAS, Development Partners annual coordinating meeting concludes today
EU urges ECOWAS nations to comply with common tariff (StarAfrica)
ECOWAS electricity regulators, operators meet today in Accra (VibeGhana)
IGAD summit in Juba delayed to next week (Sudan Tribune)
IGAD, UN convene peace and security dialogue
IGAD’s regional assessment and mapping of radicalization and violent extremism
Malabo meeting to scale up regional agricultural trade and value chains (IPPMedia)
According to NEPAD, the topics to be addressed during the conference are: a progress report on regional agricultural trade and the performance of the strategic value chains and the regional regulatory and policy framework - moving towards greater coherence in trade and agricultural policies in Central Africa. Finally, the conference recommendations will have to be incorporated into the framework of the PRIASAN action plan, as will the arrangements for the governance system of the Regional Council for Agriculture, Food and Nutrition in Central Africa (CRAAN).
Kenya’s Daily Nation is posting a series of articles on the coffee sector: Coffee's share of exports falls five-fold over 30 years, How coffee farmers lose millions at the hands of millers, How groups of coffee farmers overcame cartel, The case for a commodities exchange to lock out rogue traders and cartels
COMESA member states study Sudan’s Bt-cotton fields
Twelve officials and seven journalists drawn from Malawi, Egypt, Ethiopia, Kenya, Swaziland, Zambia and Zimbabwe participated in the visit. It covered biotechnology and bio-safety Research Centre, ginneries, seed processing units and several Bt-cotton farms along the Blue Nile River. Sudan is the only state in COMESA to have commercialized the Bt-cotton technology (since 2012) with over 100,000 acres currently under cultivation and 97% of the farmers now growing the variety.
G20 Summit resources: G20 Leaders’ Communiqué, Antalya Action Plan, the 22 Agreed Documents can be accessed from here
WTO, OECD, IMF at G2O: DG Azevêdo urges G20 leaders to strengthen global trading system, G20 leaders endorse OECD measures to crackdown on tax evasion, Lagarde urges full implementation of G20 agenda
PIDA Week calls for scaling-up project preparation to unlock infrastructure financing (AfDB)
Delegates attending the consultative Week for PIDA, taking place at the headquarters of the African Development Bank in Abidjan from November 13-17, heard that the most binding constraint to unlocking infrastructure financing in Africa was lack of properly prepared projects, which in turn is due to lack of adequate capacity to prepare large projects.
Carlos Lopes: 'Tunisia’s economic future is in Africa' (UNECA)
Unfortunately, Tunisia is not particularly well integrated with the rest of the continent. In terms of its share of African exports in relation to GDP, it ranks 29th in the continent. In terms of investment, while it has one of the best regulatory environments in Africa (4th in terms of starting and operating a local business), Tunisia ranks only 28th in terms of attractiveness for foreign investment. Accordingly, when we look at regional value chains, Tunisia ranks 21st in terms of its share of the total exports of intermediate goods within Africa. A study that ECA has just conducted with UNIDO assesses the impact of various strategic trade agreements on exports for Tunisia and North Africa.
Trade in the spotlight at Commonwealth summit (CommSec)
International trade will be one of the prominent issues on the agenda when Commonwealth leaders meet in Malta between 27 and 29 November, as countries seek ways to respond to urgent global challenges. Under the theme ‘The Commonwealth – Adding Global Value’, heads of government will gather at the biennial summit to address international priorities including climate change, migration and violent extremism. The Commonwealth Business Forum, taking place in the run-up to the summit, will serve as a platform for countries to showcase investment opportunities and improve trade. During the Forum, the Commonwealth will launch its new trade report, which provides an in-depth analysis of trade issues relevant to the Commonwealth.
Migration, refugees and internally displaced persons: STC convenes in Addis (AU)
The overall objective of the first session of the STC on Migration, Refugees and Displaced Persons is to consider and adopt its Rules of Procedure, consider and adopt Common African Position on Humanitarian effectiveness to submitted to the World Humanitarian Summit, due to hold in Istanbul, Turkey in May 2016 and the African Humanitarian Policy Framework and the Disaster Management Guidelines.
Migration and the Global Development Agenda (World Bank)
As the first event (9 Dec) after the finalization of the SDGs, this conference will bring together major stakeholders on migration and development to highlight the latest thinking on how to maximize the benefits and minimize the risks associated with migration for host, origin and transit countries as well as for the migrants and their families
Rwanda’s border communities urged to optimise integration benefits (New Times)
Kenya-Egypt trade exchange hit $474m in 2014 - minister (Zawya)
Ethiopia: UN warns of deepening food insecurity (UN News Centre)
El Niño on track to be among worst ever, but world better prepared for fallout – WMO
South-South cooperation on climate change: Beijing conference speech by Ibrahim Thiaw (UNEP)
Africa has the world’s fastest-growing labor force but needs jobs growth to catch up (Quartz)
Should we continue to use the term “developing world”? (World Bank Blogs)
India: October trade data shows frailty of economic recovery, Merchandise exports contract for 11th month
Brazil keen to further strengthen trade ties with India (Economic Times)
USDA secretary to lead trade mission to Africa (Crop Protection News)
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South Africa and U.S. agree on terms for U.S. poultry imports
Earlier this month the US threatened to suspend trade benefits for South African farm products.
South Africa has signed an agreement with the United States to resume import of 65,000 tonnes of chicken each year, which had become bogged down over health concerns, the government said on Tuesday.
The veterinary trade protocol comes after the U.S. threatened to suspend trade benefits for South African farm products earlier this month, in retaliation against the clamp down on poultry imports.
South Africa has been concerned that an outbreak of avian flu in the United States which killed nearly 50 million birds could pose animal and human health risks to Africa’s most advanced economy.
“We are on track to resolving the outstanding issues related to beef and pork. The chicken protocol shows we are moving in the right direction,” South Africa’s Department of Trade and Industry spokesman Sidwell Medupe told Reuters, adding that outstanding issues will be finalised by Dec. 31.
The pact the two countries signed is part of the African Growth and Opportunity Act (AGOA), a U.S. programme designed to help African exporters.
The agreement would see the United States emerge as one of the top poultry exporters to South Africa.
South Africa imposes “anti-dumping” duties of above 100 percent on certain chicken products, and industry groups said removing those import barriers opened a market which had been closed for the last 15 years.
South Africa-United States sign Poultry Veterinary Trade Protocol
The “Protocol for Poultry Meat and Day-Old Chicks” has been signed by South African and US Veterinarians on Friday, the 13th of November, 2015.
After several months of technical discussions by the South African and US Veterinary experts a Poultry HPAI Trade Protocol has been finalised.
The United States and South African Veterinary authorities have been negotiating a Poultry HPAI Trade Protocol in the event of any new outbreaks of Avian Flu (HPAI) in the United States to secure the continued exports of poultry from those areas in the US that are NOT AFFECTED by Avian Flu. Almost 20 US States experienced outbreaks of Avian Flu this year.
Negotiating an appropriate trade protocol and health certificate that both secures market access for the US and also ensures safety for animal and human health was a challenging task for the Veterinarians from both the United States and South Africa.
This agreement signals another significant milestone in the process of securing AGOA for South African exporters into the US market.
South Africa’s Message on its AGOA eligibility remains:
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AGOA has contributed significantly towards building a mutually beneficial partnership between the USA and South Africa.
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South Africa is a vital part of the regional integration and development process underway in Africa and removing South Africa from AGOA would substantially diminish the significance of AGOA for sub-Saharan Africa and the United States.
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The breakthrough made at the June 6-7th meeting in Paris on the poultry issue and the progress made on the SPS issues related to poultry, beef and pork offer significant opportunities for the US and South Africa to increase their trade in Agriculture.
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South Africa is a relatively open economy and trade and investment relations between South Africa and the United States have continued to grow and deepen during the period under AGOA
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Bilateral mechanisms, such as TIFA, have provided an excellent forum for the resolution of trade and investment concerns.
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South Africa meets all the eligibility criteria to remain a beneficiary of AGOA for the next 10 years.
Background
Since August 2014 South Africa had campaigned successfully for AGOA to be renewed for all sub-Saharan African Countries.
South Africa’s campaign in Washington to also be included in the extended AGOA was successful.
President Obama signed the AGOA Extension & Enhancement Act (AEEA) of 2015 into law on June 29.
However, the US lobbies insisted that some issues of interest to them such as poultry, pork and beef needed to be resolved by South Africa to allow SA to be eligible South Africa remains on track to finalise outstanding issues by 31 December!
While the US out-of-cyle review held on the 7th of August in Washington had raised a number of concerns of US lobby groups, the USTR confirmed the main issues to be resolved in exchange for South Africa’s participation in AGOA were the three “meats”: poultry, beef and pork.
SA’s Veterinary experts have had several bilateral engagements since the Paris 4th and 5th June meeting including in Paris, Baltimore and via Video Conference on the 27th July, 14th of September, 9th of October, 15th of October, and 6th of November, to resolve the technical SPS issues of mutual concern, to facilitate the imports of these three meats from the US to SA.
The 65 000 ton quota will be open by 31st December 2015.
South Africa’s International Trade and Administration Commission has published the Anti-Dumping draft Rebate Regulations on Friday, the 30th of October, 2015 for comment.
The Regulations will be finalized by the end of November by ITAC and the quota for US bone-in-chicken pieces (chicken legs) will be created by SARS before the end of December 2015.
Issued jointly by the dti and Department of Agriculture, Forestry and Fisheries
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Committee on Regional Cooperation and Integration (CRCI): Enhancing Productive Integration for Africa’s Structural Transformation
Regional Cooperation Committee meeting to discuss improvements to Africa’s productive integration and Continental Free Trade Area
Despite growth during the past decade and relatively good performance, African economies lack industrialisation and integration. Academic evidence from the Economic Commission for Africa (ECA), the African Development Bank (AfDB) and the African Union Commission (AUC) shows this recent growth has had no impact on the underlying structural design of these economies and to diversify its economies, the continent must reverse its dependence on merchandise exports dominated by raw and unprocessed commodities.
The ninth session of the Economic Commission for Africa Committee on Regional Cooperation and Integration (CRCI) will therefore convene in Addis Ababa from 7 to 9 December 2015 to discuss means of promoting and accelerating productive integration through trade and market integration; economic diversification; competitiveness; infrastructure; regional and continental value chains development; and the financing and investments needed to meet implement these policies.
Studies, including the recent ECA Economic Report on Africa (ERA), suggest that to improve intra-African trade, the continent must address its overall weak productive capacities and lack of competitiveness and technological sophistication. The studies cite infrastructure as one of the key impediments to productive integration in Africa. An insufficient infrastructure has adverse effects on supply and value chain linkages, not only in the agriculture sector on which the majority of Africans depend, but also in manufacturing and other sectors of the economy. It also affects growth, the creation of jobs and eventual elimination of widespread poverty.
With infrastructure in place, intra-African trade and regional value chains can effectively facilitate Africa’s industrialization and eventual entry into global value chains, the report suggests.
Themed “Enhancing Productive Integration for Africa’s Structural Transformation”, this ninth session of the Committee will meet to review several documents such as the report on Assessing Regional Integration in Africa VII: Innovation, Competitiveness and Regional Integration (ARIA VII) which recommend that Africa implement innovation-friendly policies if it is to achieve sustained economic growth and transformation.
The ARIA VIII and ECA Economic Report on Africa recommend increasing investments in hard infrastructure, financial services, soft infrastructure and a creation of conducive macroeconomic policies and business environment. Investments in transport, energy, and information and communication technology form a strong basis for a viable and an economic oriented regional integration, the reports argue.
While the eighth session of the Committee focused on concrete policy actions and measures required to enhance progress in trade, regional cooperation and integration, this ninth session will address specific policies such as the Action Plan for Boosting Intra-African Trade, and the envisaged establishment of the Continental Free Trade Area (CFTA) which African Union Assembly of Heads of State and Government wish to launch by 2017.
Since the last session’s discussions, important progress has been made with regard to CFTA. The Heads of State of the tripartite countries launched the Tripartite Free Trade Area, comprising 26 member states of the Common Market for Eastern and Southern Africa, the Southern African Development Community and the East African Community during their recent summit in Egypt in June 2015. The African Union Assembly of Heads of State and Government also launched the negotiations for CFTA during their summit in Johannesburg in June 2015, and reaffirmed their earlier decision to have CFTA established by 2017.
For the CFTA to be more meaningful, it is recommended for African states to transform the structure of their economies through accelerated industrial development and by creating supply and value chain linkages across the continent.
Parallel to the CFTA negotiations is the need to accelerate the progress on economic diversification and structural transformation in Africa, in order to reverse the continent’s dependence on merchandise exports dominated by raw and unprocessed commodities. The structural transformation of the African economies, by means of accelerated industrial development and supply and value chain linkages across the continent, therefore remains a key priority action to make CFTA more meaningful. An operational CFTA buttressed by this structural transformation of the African economies would not only greatly boost intra-African trade, but also it would enhance Africa’s marginalized position in the global trading and economic mainstream.
Deficit infrastructure also has an adverse effect on Africa’s potential to unlock its productive integration and regional value chains capacity as a pathway to economic oriented regional integration. Infrastructure development is vital for regional integration as it facilitates and fosters intraregional trade and the development of regional markets, accelerated growth, and ultimately the creation of jobs and the reduction and eventual elimination of widespread poverty. Furthermore, with infrastructure in place, intra-African trade and regional value chains can effectively facilitate Africa’s industrialization and eventual entry into global value chains.
Productive integration would, therefore, form a strong basis for a viable and an economic oriented regional integration. Productive integration and capacity for effective participation in regional and global value chains requires boosting investments in key strategic sectors, such as hard infrastructure (particularly transport, energy, and information and communication technology) and other enablers such as financial services, soft infrastructure and a conducive macroeconomic policy and business environment.
Against this background, the ninth session will take place at a time of renewed commitment and urgency towards accelerating Africa’s structural transformation and the operationalization of CFTA, as embodied in the African Union’s Agenda 2063, the post-2015 development agenda, and other related developmental action plans. The ninth session will provide a platform for member States to deliberate on this topical and important issue, including ways and means of promoting and accelerating productive integration and its ancillary components of trade and market integration, economic diversification, competitiveness, infrastructure, regional and continental value chains development, and the financing and investments needed to meet these strategic objectives.
In the context of the discussions on the theme, the ninth session will also have the opportunity to receive and review brief parliamentary reports and presentations by the Secretariat on developments taking place in the different areas of the ECA Regional Integration and Trade Division’s work. The reports and presentations will cover the following areas:
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Development and promotion of regional strategic food and agricultural commodities value chains in Africa. The discussions on this will look at a regional value chain model for the development of agribusiness and agro-industries with the potential for increased participation of small holders in the chain at national level first, then through identification of preferential agroecological zones, recommend regional value chain for economies of scale;
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The status of food security in Africa. Discussions will be held on the update of the status of food and nutrition security in Africa. The root causes of food insecurity and policy recommendations to enhance capacity and engagement at national, subregional and regional levels will be the mainstay of the discussions;
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Intra-African trade and the Africa Regional Integration Index. An overall picture of intra-African exports and imports between 1995 and 2013 will be presented and discussed. The session will debate on the composition of the intra-African trade that tends to be dominated primary by commodities, reflecting not only low levels of industrialization but also the low level of transformation in the continent. A joint initiative by the African Development Bank, the African Union Commission and ECA in producing the Africa Regional Integration Index will be presented and discussed during the session. The index project covers regional dimensions of tariff liberalization, trade facilitation, free movement of persons and labour markets, financial integration, macroeconomic policy convergence, social and cultural integration (including gender issues), regional economic community institutional capacity, regional value chains, statistical harmonization and regional infrastructure (including communications, transport and energy);
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Africa’s international trade. Presentations and discussions will focus on the developments in international trade in 2013 and 2014. The African trade performance and recent trends in merchandise and services, the status of negotiations under the Doha Development Agenda and the Economic Partnership Agreements; and the African Growth and Opportunity Act (AGOA), the Aid for Trade initiative and the increasing importance of South-South cooperation with China and other Asian economies – will all be salient areas for discussions and will conclude with policy recommendations;
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Infrastructure development in Africa. Discussions in the area of infrastructure, paying particular attention to the transport and energy infrastructure, will be held. The main focus will be to show the current status and gaps of the transport and energy infrastructures, the key priority areas to be discussed, and finally, the current state of play and progress in bridging the requisite infrastructure finance gap;
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Review of industrial policies and strategies in Africa. The session will discuss the relevant information on the development of industrial capacities to fill observed gaps in the sector; and
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Review of investment policies and bilateral investment treaties landscape in Africa. Implications for Regional Integration. There will be a dialogue on bilateral investment agreements and how they can help advance Africa’s economic and social transformation.
Participants for this Committee are expected to comprise of senior officials and experts drawn from African ministries in charge of regional integration, trade and industry, infrastructure, agriculture and land policy; Addis Ababa based African Ambassadors and Plenipotentiaries based in Addis Ababa; representatives from the African Union Commission, the regional economic communities, the African Development Bank, and the NEPAD Planning and Coordinating Agency; representatives from the organisations of the United Nations system, the World Bank, and the African Economic Research Consortium (AERC); and development partners as observers.
Established by the ECA Conference of Ministers, the Committee on Regional Cooperation and Integration (CRCI) meets on a biannual basis to review the work undertaken on regional integration and trade such as food security, agriculture, industrialisation, infrastructure and investment in Africa.
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G20 leaders endorse OECD measures to crackdown on tax evasion, reaffirm its role in ensuring strong, sustainable and inclusive growth
The leaders of the world’s 20 largest economies on 16 November 2015 endorsed overhauled global standards to crackdown on tax evasion and recognised the important contribution made by the OECD to help the Turkish presidency in achieving the goal of more inclusive growth.
At their Summit in Antalya, Turkey, the G20 leaders committed to the implementation of the Base Erosion and Profit Shifting project (BEPS) which closes gaps that allow corporate profits to “disappear” or to be artificially shifted to low or no tax environments. They called on the OECD to monitor progress and to develop, by early next year, an inclusive framework including the participation of developing economies on equal footing.
The leaders welcomed progress being made to boost transparency and fairness in the global tax system, reaffirming their commitments to implement automatic exchange of information as early as 2017 and by 2018 at the latest.
The G20 called on the OECD, IMF and World Bank to continue to monitor their commitment to boost growth, create jobs and tackle inequality through the National Growth Strategies established at last year’s Brisbane Summit.
The OECD and the ILO have been tasked with assisting countries in monitoring implementation of a new G20 pledge to reduce the share of young people who are most at risk of being permanently excluded from the labour market and from education by 15% by 2025.
Speaking from Antalya, OECD Secretary-General Angel Gurría said: “The comprehensive policy package which has been promoted by Turkey as President of the G20 – including skills, youth employment, job quality and tackling inequalities – represents real progress. The OECD will continue to play its part in helping to build a fairer and more inclusive global economy. ”
In presenting to the Summit their joint assessment of progress made so far in the Growth Strategies, the organisations said action by governments needs to be accelerated. The OECD has also helped develop the G20 Skills Strategy to tackle inequality as well as low productivity. A job quality framework has been produced to promote decent working conditions throughout G20 countries. The two organisations will also continue to monitor progress towards the G20 goal to increase women’s participation in the labour force.
In addition, the OECD is providing the G20 with analysis and policy recommendations to boost investment and stimulate business dynamism, particularly among small and medium-sized enterprises (SMEs).
With weak growth and a slowdown in emerging markets, spurring investment, particularly through private sector involvement, will be crucial. The leaders finalised the country-specific Investment Strategies developed with the OECD. Its analysis indicates that the strategies would contribute to lifting the aggregate investment to GDP ratio by an estimated 1 percentage point by 2018.
The OECD supported the G20’s Turkish presidency’s emphasis on SME development and the participation of poor developing countries in the global economy. It has provided analysis on improving the integration of both small businesses and poor countries into global value chains, drawing up G20/OECD principles on SME financing and G20/OECD Principles of Corporate Governance. Both sets of principles were endorsed by the leaders.
OECD work on migration and climate change informed the debates at the Antalya summit. In order to support green finance and the fight against climate change, the OECD has delivered work on tracking climate finance as well as toolkits for channelling green investment.
Building on its experience analysing migration, the OECD is assessing the economic impact of the recent surge of refugees in Europe.
The Summit, overshadowed by the tragic attacks in Paris, two days before, devoted a special session and issued a separate statement on increasing international cooperation in countering terrorism.
As the Secretary-General of the Paris based Organisation, Mr Gurría said: “The impact of these atrocities is all the more poignant as Paris is literally our home, where we have our headquarters and where I along with the majority of over 2500 OECD staff and representatives of our 34 Member countries and their families live.”
“Our condolences, thoughts and prayers are most particularly with the families of the victims. This is a moment when we will all stand more united than ever in defence of the freedoms our democracies hold dear.”
» G20 Leaders’ Communiqué: Antalya Summit, 15-16 November 2015
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DG Azevêdo urges G20 leaders to strengthen global trading system
Director-General Roberto Azevêdo briefed G20 leaders at their meeting in Antalya, Turkey, on 16 November on preparations for the WTO’s 10th Ministerial Conference in Nairobi next month.
In their communiqué, the leaders gave a strong call for the WTO to deliver in Nairobi and to implement all the elements of the Bali Package, including those on agriculture, development, public stockholding as well as the prompt ratification and implementation of the Trade Facilitation Agreement. However, in the meeting much of the discussion focused on regional and bilateral trade initiatives due, in part, to slow progress in the Doha Round negotiations.
The Director-General said:
“Our analysis of regional trade agreements shows no obvious conflicts with WTO rules – they all have WTO DNA. But a bigger consideration is where regional agreements cover areas that are not currently covered by the WTO. No one would suggest that regional agreements should not venture into these areas, but conversations in the WTO would definitely be more inclusive, coherent and balanced.
“Progress in Nairobi on a number of fronts – including on issues under the Doha Round – would help to strengthen trade at the global level. We are working towards agreement on issues including agricultural export subsidies and similar measures, and a package for the least-developed countries. This would be significant. We have been trying to do away with export subsidies for decades. We also need to support ratification of the Trade Facilitation Agreement and continue to implement all other elements of the Bali Package.
“But what we decide to do after Nairobi is also crucial. We have to find ways of moving the Doha issues forward and keeping the organization operational and responsive to challenges currently faced by members.
“This is particularly important against the backdrop of a persistent slowdown in trade growth, continuing protectionism and unprecedented activity at the regional and bilateral level. We must ensure that the global trading system is as strong as possible in order to boost growth, jobs and development. But for this to happen, the G20 leaders need to work collectively – they must work to find and explore synergies on a range of trade-related issues. We are not doing that now.”
The key section of the official G-20 communiqué reads as follows:
“The WTO is the backbone of the multilateral trading system and should continue to play a central role in promoting economic growth and development. We remain committed to a strong and efficient multilateral trading system and we reiterate our determination to work together to improve its functioning. We are committed to working together for a successful Nairobi Ministerial Meeting that has a balanced set of outcomes, including on the Doha Development Agenda, and provides clear guidance to post-Nairobi work. We will also need to increase our efforts to implement all the elements of the Bali Package, including those on agriculture, development, public stock holding as well as the prompt ratification and implementation of the Trade Facilitation Agreement. We will continue our efforts to ensure that our bilateral, regional and plurilateral trade agreements complement one another, are transparent and inclusive, are consistent with and contribute to a stronger multilateral trade system under WTO rules. We emphasize the important role of trade in global development efforts and will continue to support mechanisms such as aid for trade in developing countries in need of capacity building assistance.”
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Fourth Congress of African Economists: Opening Speech by Anthony Mothae Maruping
Opening Speech by Anthony Mothae Maruping, Commissioner for Economic Affairs, AUC, at the Fourth Congress of African Economists being held from 16-18 November 2015 in Accra, Ghana, under the theme “Industrial Policy and Economic performance”
“Optimal industrial policy for Africa’s transformation”
It is my distinct honour and special privilege to convey warm greetings of Her Excellency the Chairperson of the African Union Commission, Dr. Nkosazana Dlamini Zuma, and on her behalf, may I warmly welcome you, one and all, to the 2015 Edition of the Congress of African Economists under the theme: Industrial Policy and Economic Performance in Africa.
Allow me to express my profound gratitude and appreciation to the Government and people of Ghana for their usual warm welcome and hospitality and for graciously agreeing to host this 2015 Congress of African Economists in this pioneering country. Ghana is the cradle of Pan-Africanism and therefore a suitable location for this Congress.
I first came to Ghana in 1984 to attend the meeting of the Executive Board of the Association of the African Universities (AAU) which has its headquarters here. Those were in the days of Prof Sawyer (then Vice Chancellor) and Prof Benneh (then Pro-Vice Chancellor). Since then I have had the privilege of coming innumerable times. More vividly I remember negotiations on the predecessor to the Busan Commitments regarding Global Partnership for Effective Development Co-operation and later negotiations that resulted with UNCTAD XII in 2008. Not long ago there was a conference addressing inequalities. Only last week, November 10-11, 2015, there was a regional stakeholders workshop seeking to identify effective ways of combating Illicit Financial Flows from Africa, under the baton of H E Former President Thabo Mbeki. Ghana ought to be commended for taking the lead in addressing inequalities and in curbing illicit financial flows and also for being exemplary in good governance and deepening of democracy, among many other contributions.
At this point let me also like to express gratitude to colleagues and development partners from the international community, and especially the African Capacity Building Foundation (ACBF), for sharing with AUC valuable time and ideas and resources. The Congress of African Economists is an important platform for collaboration and for advancing solutions to the key economic challenges facing the African continent.
Gratitude should be expressed to the economists who have graciously honoured AUC invitation to come and actively participate in this congress.
At this juncture allow me to attempt to give context to the pivotal role of industrialization in the quest for transformative growth. Not so long ago almost every speaker on African economies, with the exception of the few, jumped on to a “bandwagon” chanting: the refrain “six out of ten fastest growing economies globally are in Africa” Analysts put average growth rates at 4%+ seen as rising towards 5%+. The few that did not jump onto this bandwagon were viewed as pariah. Yet Africa has fifty four economies making six only eleven per cent. In addition, given that Africa is still home for over 30 least developed countries and several low middle income countries, all accompanied by rapidly growing populations, growth rates of between 4 and 5 per cent fell short of what would be required to achieve economic transformation sought. Sustained growth rate of at least 7 per cent in real terms remains what is required to achieve sufficiently rapid socio-economic development. Coupled with diversification and inclusivity and equitable distribution of income and wealth, some resilience to external shocks would be attained and Africa would be set on the road towards poverty eradication. That 4-5 per cent growth rate that Africa was supposed to celebrate depended largely on commodities price boom. Many African economies remain commodities based. They thrive during commodities price boom with multinationals engaged in extractive industry repatriating profits. GDP figures then look impressive but very little remains to permeate into the domestic economy. Such economies experience setbacks when commodities prices fall. Hence the need to transform African economies ensuring diversification and value addition. African economies are currently going through a rough patch. Demand for raw materials exports has sharply declined, commodities prices have dropped drastically, drought is adversely affecting agricultural production and hydro-electric power generation, thus exacerbating energy deficit. Unemployment rate is rising and incomes are declining. Poverty is rapidly rising. Tax bases are shrinking. Fiscal deficits are widening. Foreign exchange reserves are dwindling. Domestic borrowing has soared. External borrowing has been complicated by credit rating downgrades. Authorities in most cases are resorting to deep expenditure cuts affecting supply of necessities. There is definitely a dire need for a new strategy for African economies. Business as usual is not an option. Agenda 2063 is that strategic framework.
On September 25th, 2015, the General Assembly (GA) adopted by acclamation Transforming Our World: The 2030 Agenda for Sustainable Development together with its 17 Sustainable Development Goals (SDGs) and 169 targets. Statisticians are busy working on methodologies for quantifying attendant indicators. Africa had contributed substantially to this outcome through her Common African Position on Post 2015 Development Agenda (CAP on P2015 DA). CAP influenced the work of the Open Working Group and subsequent inter-governmental negotiations. Africa also had the fortune of holding the Presidency of GA and of G77 + China. In addition one of the facilitators was African and UN SG Advisor on P2015 DA was African as well. Omens were good for Africa. Industrialisation featured prominently as an essential part of transformative growth in CAP (paragraph 23) and in SDGs as Goal 9.
In 2013 the African Union (AU) decided to activate her new mandate, from that of OAU of pre-occupation with decolonization, to that of AU of economic, social and political development. Work on African Agenda 2063 was commenced. Consultations with a wide array of stakeholders were held. Interactive website was opened. Written inputs from member states were submitted. Regional Economic Communities and 35 member states strategic frameworks studied and factored in. Mega trends were analysed. Contents of the AU Constitutive Act, existing continental frameworks, programmes and resolutions were captured. All the foregoing were compiled, analysed and synthesized to formulate African Agenda 2063, both the conceptual part (Strategic Framework) and the First Ten Year Implementation Plan. Conceptual Framework was adopted by AU Summit in January 2015 while the 1st Ten Year Implementation Plan was adopted in June 2015. Essentially Agenda 2063 calls for transformative economic growth in Africa. It proposes a move away from narrow base commodities based economies to diversified economies with high value addition. As a means to this end Agenda 2063 proposes:
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Development of infrastructure, hard and soft, and its broad context, as well as energy generation;
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Boosting quantity and quality of production in the agricultural sector;
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Investing much more in science, technology and innovation for development (technology development, transfer and diffusion);
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Increasing investment in human capital with emphasis on health, education and training with special emphasis on technical skills;
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Accelerated industrialization (which is still considered a leading job creator);
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Improvement of the services sector in quantity and quality;
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Expediting integration which creates economies of scale opportunities and facilitate efficient allocation of factors of production);
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Nurturing African private sector development (considering that it is largely the private sector that engages in extraction, diversification, value addition and distribution and thus create jobs and contributes to tax bases);
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Raising competitiveness to enable Africa joining sub-regional, regional and international supply chains trough trade;
Agenda 2063 also has twelve fast track programmes and projects. These are:
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Realizing integrated high speed train network;
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Developing e-network on the continent;
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Speeding up implementation of open skies decision of 2002;
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Hastening the pace in implementing the Grand Inga Dam hydro power project;
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Silencing the guns by 2020;
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Devising and applying commodities strategy (this in essence is industrialization as it involves value addition and diversification);
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Convening periodic high level African stakeholders forum;
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Accelerating establishment of continental financial institutions;
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Reaching Continental Free Trade Area (CFTA) by 2017;
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Devising Africa outer space strategy;
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Giving impetus to the growth of African Virtual E – University.
Enablers, such as good governance in its broad context, and others have been given due attention as well. Similarly cross-cutting considerations such as gender parity and women empowerment, engagement of youth in economic activity and inclusion of people with disabilities in the work place, have all been duly factored in.
Clearly industrialization that Africa seeks cannot thrive in isolation. There is a definite symbiotic relationship among various development facets. They feed one another. They depend upon one another. A comprehensive approach is, therefore, more likely to succeed.
A tally of the 20 goals of Agenda 2063 and 17 SDGs show clearly that the latter are embedded in the former. Agenda 2063 encapsulates the 17 SDGs. Africa, therefore, by pursuing Agenda 2063 will ipso facto be meeting her global obligations on SDGs.
Ambitious as it may seem Agenda 2063 is doable. Due attention was paid to ensure avoiding pitfalls of the past that led to delays in the implementation of the previous frameworks. What gives greater hope of achieving the goals of Agenda 2063 are the fact that:
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Bottom up approach has ensured inclusion, participation, ownership and commitment by the public, private and civil society sectors;
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Basing the framework on firm foundations and commitments including constitutive act, existing continental, regional and national frameworks, initiatives and programmes, resolutions and action plans has ensured coherence, alignment and harmony;
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Implementation involves public, private and civil society sectors;
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Implementation is at national, regional and continental levels;
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20 goals and 41 priorities of the First Ten Year Implementation Plan are clear, enabling results based management and mounting of a credible accountability framework;
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Risk analysis has been conducted and risk management strategy developed;
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Requisite implementation capacity has been assessed and strategy for closing the gaps devised;
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Effective communications strategy has been developed;
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Domestication process at national and regional levels is ongoing;
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Means of implementation have been, and is being, given full attention;
Africa hosted the 3rd International Conference on Financing for Development (FfD3). Watered down version titled Addis Ababa Action Agenda (AAAA) was the outcome document adopted. Developing countries would have preferred a more committal Addis Ababa Accord (AAA). In paragraphs 23, 24, and 25, illicit financial flows (IFF) is referred to. The leadership of Africa on this matter is recognized. Africa commenced in 2011 to address this issue through the African Union’s High Level Panel led by H. E. former President Thabo Mbeki. HLP report, based on consultations with a broad spectrum of relevant stakeholders, is comprehensive, meticulous, incisive and courageous. The facts it unearthed, observations it made, analysis conducted, interpretations of results given, synthesis unfolded and conclusions arrived at and recommendations derived, are all profound. It is a credible report. At the instruction of the AU Summit consultations with African stakeholders have already been held to identify modalities of implementing recommendations of the HLP report on combating IFF from Africa. The last was right here in Accra, November 10-11, 2015.
On Friday October 23rd, AUC, UNCTAD and UNECA and others persuaded the joint meeting of ECOSOC and 2nd Committee of GA to put IFF issue on the global platform in keeping with paragraphs 23-25 of AAAA, with the view to developing a global framework or at least a roadmap on curbing IFF globally. Africa can do her part but for effectiveness it requires others to play their part as well considering that IFF is a global challenge.
In order to raise required funding for Agenda 2063 and SDGs IFF from Africa must be combatted resolutely and effectively, among many other measures and other sources. Heavy reliance for financing Agenda 2063 will be on Domestic Resource Mobilisation (DRM). Hence the imperative of stopping loss of potential domestic revenues through IFF. Still selective, conditionality laden ODA characterized by often unmet commitments, and the elusive FDI, are expected to be only supplementary.
It is clear from all the foregoing that industrialization is of great importance in order for Africa to achieve her sought after economic and social transformation, especially with regards to the realization of Agenda 2063 in the longer term and the Sustainable Development Goals in the comparatively shorter term. Allow me to elaborate on industrialization.
A year ago, the Conference of Ministers of Economy, Finance, Economic Planning and Development resolved that the need for industrialization is obvious and that Africa must “design a comprehensive industrial development framework that is inclusive and transformative to speed up and deepen value addition of local production, linkages between commodity sector and other sectors”.
Therefore, this Fourth Edition of the Congress of African Economists offers a unique opportunity to develop and discuss issues of critical relevance for designing and implementing optimal policies for inclusive and sustainable industrialization in Africa.
While the Third Congress took a comprehensive approach to industrialization as a catalyst of economic emergence, this year we the agenda has been streamlined to cover specific topics to permit us to delve into greater details of the issues that have the biggest impact on growth and economic performance, and reach where impediments may be inhibiting growth in the region. In order to help deepen the understanding of these complex issues, a broad range of African Economists from the continent and its Diaspora have been invited to share their insights and expertise. The Commission will be in “listening mode”. The hope being to learn from participants about best approaches to tackling these challenges effectively, and about how the Commission can be of assistance towards fostering industrialization and achieving Agenda 2063 goals and priorities.
Industrialization is key for Africa to foster structural transformation and improve standards of living.
Yet, industrialization has remained elusive, with an embryonic manufacturing sector, low productivity and marginal participation in domestic and international markets. In fact industrialization is seen as receding by some analysts. While services have surpassed agriculture and industry as the leading income-generating sectors across Africa, this has not created the quantity and quality of jobs that are sought after which should emerge from manufacturing and labour-intensive production.
This Fourth Edition of the Congress of African Economists, therefore, calls on the continent to refocus its economic development strategies on industrialization, particularly on the means of formulating and implementing effective industrial policies.
In the past, most African countries pursued industrial policy with mixed results. It is now time to acknowledge that appropriate developmental state support is vital to address market failure and spur industrialization and to institutionalize industrial policy in national and regional development strategies at the highest levels of government.
Allow me to share with you four reasons that are viewed as making industrialization central for Africa’s transformation.
First, industrialization is essential to sustain the current Africa’s quest for growth leading towards structural transformation.
As African countries require high and sustained economic growth to make significant progress in reducing poverty, generating employment opportunities for young people and engendering development, industrialization appears to be one of the most important routes for structural transformation.
In that perspective, it should be stressed that no country in the world has achieved rapid and sustained economic growth without structural transformation, generally characterized by the shift of production and labour from lower to higher value and productivity activities and sectors.
A robust and expanding industrial sector, including more manufacturing and resource processing and value addition is crucial for the structural transformation of African economies. In spite of the continent’s huge untapped human resources and natural endowments and more than a decade of growth turnaround, the lack of industrialization has limited Africa’s long-term growth prospects as well as the success of growth on social development. Industrialization would also render African economies more resilient to external shocks.
Second, industrialization must take advantage of best practices and strategic engagement with the private sector.
Our assessment must also check the best practices in terms of industrial and trade policy instruments- such as local content requirements, appropriate monetary policy required for industrialization, the impact of trade partnerships on industrialization and intra-Africa trade.
Building on past achievements and lessons, and taking account of feedback received from consultations with stakeholders during the drafting of Agenda 2063, the AUC proposes a strategic framework for strengthening the role of the private sector in achieving inclusive and sustainable growth. This framework consists of three levels at which the Commission believes it can add value and effectively complement actions by its Member States, RECs and private sector organizations to foster the role of the private sector in inclusive and sustainable industrialization and growth. These three levels are: (i) fostering a business environment conducive to private sector initiatives; (ii) developing productive capacities of the private sector, and; (iii) strengthening private sector engagement for development in Africa.
Industrial policy is unlikely to succeed without conscious efforts to build champions, and without dynamic dialogue and interactions between the government and the private sector at sectoral, country, regional and continental levels.
Third, sustainable and inclusive industrialization must be built on regional integration and efficient economic and social infrastructures.
Sustainable and inclusive industrial development must be accompanied by our integration efforts towards the Continental Free Trade Area (CFTA). In doing so, developing effective regional policies will support industrialization, achieve more equitable growth and reduce the current trends of regional disparities within the continent. AU is taking practical measures to deepen integration, enhance free movements of people, goods and services and removing tariff and non-tariff barriers, as well as harmonizing regulations and policies so as to boost intra-African trade during the next decades. These are articulated in the fast track programmes/projects of the 1st Ten Year Implementation Plan of Agenda 2063.
To achieve Africa’s regional integration agenda and prosperity, infrastructure has been recognized as a fundamental factor. We know that the infrastructure bottlenecks on our continent (especially transport, ports and harbors, energy, irrigation and ICT) are a major challenge to industrialization and intra-Africa trade. At regional level, AU is seeking to address this challenge through PIDA and other infrastructure projects that are critical for industrialization.
At a continental level, discussions have started on developing the High-Speed Train Network Project that will link capitals and major commercial centers. This project will accelerate integration process and intra-African trade and more critically, boost industrialization.
But for the High-Speed Train to facilitate inclusive and sustainable industrialization, energy efficiency to improve economic competitiveness in an environmentally sustainable way is imperative. To avoid vulnerabilities due to energy shortage, countries should adopt efficient technologies associated with higher productivity and reduce negative externalities. Support for the development of the Grand Inga Dam Project and other energy generation projects will contribute to addressing the energy needs of the continent.
Fourth, inclusive and sustainable industrialization must ensure equal opportunities for all the segments of African society.
As the world leaders recently adopted the Post-2015 Development Agenda and SDGs, building inclusive and sustainable industrialization will be of critical importance to addressing the challenges of inclusivity and sustainability of Africa’s growth towards a stable, prosperous and integrated continent as foreseen in Agenda 2063. For the African Union Commission, the moderate progress recorded toward achieving the MDGs underlines the need to give priority to inclusive and sustainable industrialization.
As part of its support to women entrepreneurship and employment through “2015 Year of Women Empowerment and Development Towards Agenda 2063”, the Commission gives particular attention to micro, small and medium-sized industrial enterprises and to creating an enabling environment for women entrepreneurship. Women are under-represented in business communities in Africa. The Commission pushes for gender-sensitive business regulations, and works tirelessly towards addressing the specific training and support needs of women as entrepreneurs and workers to ensure that recent improvements in girls’ education are translated into real economic opportunities for women.
A similar plea is made for engagement of youth in economic activity. Inclusion of people living with disabilities also ensures that all human resources available to the Africa should be put to productive use.
With forthright and meaningful exchange of views and experiences during this Congress, I am confident that a better understanding of what works and what might not work for Africa’s economic transformation, and forging a better mutual comprehension of policy priorities, will emerge. This is what is hoped for in this Fourth Congress of African Economists here in Accra.
Even as we proceed with the congress of African Economists the important role played by the twenty five year old African Economic Research Consortium (AERC) should be acknowledged and appreciated. Possibilities of synergies should recognized
May I urge that we aim for practical and concrete recommendations that will reduce, or better yet remove, major constraints to industrialization and hence unlock Africa’s growth potential during the next decade and beyond.
May I wish you fruitful deliberations that will generate credible and pragmatic ideas for Africa’s accelerated industrialization which at present is suffering setbacks instead of progressing.
Thank you very much for your kind attention.
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Promoting regional agricultural trade and value chains for 2025: Malabo speaks to Central Africa
The Conference on Promoting Regional Agricultural Trade and Value Chains kicked off on Monday in Malabo, Equatorial Guinea, bringing together a number of key actors involved in agricultural trade and the development of the region’s priority sectors (in particular staple food). The conference will also see representatives of the regional integration institutions, specialist regional agencies, producers’ organisations, traders, processors, agro-food companies, chambers of agriculture, warehouse managers, bankers, insurers, etc.
In Central Africa, agriculture is key to economic development. In some countries of the sub region, more than 60% of the population live in a rural environment, while 50% of the working population are involved in the agricultural sector.
The process of the Comprehensive Africa Agriculture Development Programme (CAADP), launched during the Summit of the Heads of State and Government held in Maputo in 2003, was recently realigned during the Summit of the Heads of State and Government of the African Union held in Malabo (Equatorial Guinea) in 2014. In particular, the Malabo Summit strengthened the prospect of transforming agriculture so as to ensure sustainable and inclusive growth in Africa during the period 2015-2025.
The agricultural policies of the Central African countries follow a number of different approaches, depending on their urbanization levels and their strategies with regard to the exploitation of natural resources. One common characteristic to all of these Countries is that the level of local production and processing of food products is insufficient to meet consumer demand. A substantial majority of the countries in the sub-region are largely dependent on imported food products, which impact enormously on the region's balance of payments.
Despite its geographical situation and the potential complementarity in the trading of food and agricultural products, Central Africa remains one of the least integrated regions of the continent in terms of intra-regional trade, the movement of people and how the physical infrastructure interconnects.
Although regional trade integration could lead to improvements in the availability of food products and reduce the dependence on extra-regional imports, the region is far from economically integrated, with very low regional trade figures (approximately 1.2% in 2010). The main trading partners of the region's countries are the EU (32% of the region's trade), the USA (23%) and, increasingly, the emerging economies (including China, 16%).
The main constraints holding back regional trade in agricultural and agro-food products are: a) the inadequacy of supply and surplus production; b) the limited marketing capacity, particularly with regard to transport infrastructures and the structured and regulated cross-border markets; and c) the continuing Tariff and Non-Tariff Trade Barriers (procedures) for agricultural products. The poor performance of currency hedging instruments when trading is carried out between currency areas, also constitutes a significant constraint.
Situated at the crossroads between ECOWAS, COMESA and SADC, Central Africa has great potential for inter-regional trade, which is currently expanding. There are already substantial African investments, and these could increase in the coming years if the right conditions are created to encourage them.
As well as favourable agricultural and trade policies and a suitable regulatory framework, the countries of the sub-region must have the institutions and tools that enable them to provide a better structure for agricultural services and trade in agricultural and agro-food products, and to strengthen the inclusive value chains, essential for sustainable economic development. The region must also identify those regional value chains with the greatest structural potential for regional trade, so that it can support them at supranational level.
Supporting the structuring of both national and regional strategic value chains will then help to increase the value of products and producers’ income by reducing costs throughout the chain and distributing margins more equitably between the different stakeholders. The information networks and the growing role of new information and communication technologies (ICT) should help to support the more marginalised actors and improve the dialogue between the different sectors.
Topics to be addressed
Four topics will be addressed during the conference:
1. Progress report on regional agricultural trade and the performance of the strategic value chains: constraints and success factors
2. Regional regulatory and policy framework: moving towards greater coherence in trade and agricultural policies in Central Africa
3. The grain, livestock, fisheries, fruits & vegetables and roots & tubers sectors: what are the priority actions?
Structuring agricultural trade: which tools and institutions?
Marketing Information Systems (MIS): how can we develop sustainable systems?
Warrantage, commodity management and agricultural commodity exchanges: challenges and opportunities for the region
4. Cross-cutting topics:
Integrating women and youth in value chains
Funding the value chains: finding innovative approaches
The role of multi-stakeholders platforms: facilitating the emergence of sector associations (“inter-professions”)
Objectives and expected outcomes of the conference
This conference is a Central African initiative which, following on from the Malabo Declaration, endeavors to realize two of the seven commitments made by its Member States, specifically: commitment Number 2 on strengthening the funding of investments in agriculture, and commitment Number 5 on stimulating intra-African trade in agricultural products and services.
The conference will support the framework and priorities defined by the region in its PRIASAN and its regional Aid for Trade strategy. The unifying programmes for promoting value chains and developing intra-community trade remain at the heart of integration through trade and increased agricultural investment.
The aim of this conference is to provide a regional platform for dialogue and exchange for all of the public and private actors concerned:
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to review the challenges of transforming agriculture in order to exploit the opportunities related to regional trade in agricultural products and services;
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to produce a progress report on the development of the sub-region’s agricultural value chains, with the emphasis on food crops (corn, rice, manioc, yams and plantains, fruits and vegetables) and animal products (livestock meat and poultry) from case studies and comparative analyses;
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to exchange opinions and debate on the policies, approaches, tools and mechanisms needed to: (i) develop regional trade in agricultural products; (ii) structure and strengthen the strategic value chains; and (iii) fund investment in the strategic value chains; and
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to learn from the public-private partnerships (PPP) in order to help implement innovative and long-term solutions (e.g. the corridor approach).
Finally, the conference recommendations will have to be incorporated into the framework of the PRIASAN action plan, as will the arrangements for the governance system of the Regional Council for Agriculture, Food and Nutrition in Central Africa (CRAAN).
The conference will be structured with a view to producing a plan and schedule for the implementation of concrete activities and specific institutional responsibilities.
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G20 Leaders’ Communiqué agreed in Antalya, Turkey
G20 Antalya Summit, 15-16 November 2015
Introduction
1. We, the Leaders of the G20, met in Antalya on 15-16 November 2015 to determine further collective actions towards achieving strong, sustainable and balanced growth to raise the prosperity of our people. We are firm in our resolve to ensure growth is robust and inclusive, and delivers more and better quality jobs. We recognize that advancing inclusive growth and entrenching confidence require the use of all policy tools and strong engagement with all stakeholders.
2. In pursuing our objectives, we have adopted a comprehensive agenda this year around the three pillars of decisive implementation of our past commitments to deliver on our promises, boosting investments as a powerful driver of growth and promoting inclusiveness in our actions so that the benefits of growth are shared by all. We have also enhanced our dialogue with low income developing countries as part of our implementation of this agenda.
Strengthening the Recovery and Lifting the Potential
3. Global economic growth is uneven and continues to fall short of our expectations, despite the positive outlook in some major economies. Risks and uncertainties in financial markets remain, and geopolitical challenges are increasingly becoming a global concern. In addition, a shortfall in global demand and structural problems continue to weigh on actual and potential growth.
4. We will continue to implement sound macroeconomic policies in a cooperative manner to achieve strong, sustainable and balanced growth. Our monetary authorities will continue to ensure price stability and support economic activity, consistent with their mandates. We reiterate our commitment to implement fiscal policies flexibly to take into account near-term economic conditions, so as to support growth and job creation, while putting debt as a share of GDP on a sustainable path. We will also consider the composition of our budget expenditures and revenues to support productivity, inclusiveness and growth. We remain committed to promoting global rebalancing. We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to mitigate uncertainty, minimize negative spillovers and promote transparency. Against the background of risks arising from large and volatile capital flows, we will promote financial stability through appropriate frameworks, including by ensuring an adequate global financial safety net, while reaping the benefits of financial globalization. We reaffirm our previous exchange rate commitments and will resist all forms of protectionism.
5. We remain committed to achieving our ambition to lift collective G20 GDP by an additional 2 percent by 2018 as announced in Brisbane last year. Our top priority is timely and effective implementation of our growth strategies that include measures to support demand and structural reforms to lift actual and potential growth, create jobs, promote inclusiveness and reduce inequalities. We have made significant progress towards fulfilling our commitments since last year, implementing half of our multi-year commitments. Analysis by the IMF, OECD and World Bank Group indicates that our implementation so far represents more than one third of our collective growth ambition. Yet we also acknowledge that more needs to be done. We will strive more and take prompt action to expedite implementation of our remaining commitments. Going forward, we will continue to closely monitor the implementation of our commitments through the robust framework we developed this year. We will also continue reviewing and adjusting our growth strategies to ensure that they remain relevant to evolving economic conditions, policy priorities and structural challenges, in particular slow productivity growth, and that they remain consistent with our collective growth ambition. The Antalya Action Plan, comprising our adjusted growth strategies and implementation schedules for key commitments, reflects our determination to overcome global economic challenges.
6. We are committed to ensure that growth is inclusive, job-rich and benefits all segments of our societies. Rising inequalities in many countries may pose risks to social cohesion and the well-being of our citizens and can also have negative economic impact and hinder our objective to lift growth. A comprehensive and balanced set of economic, financial, labour, education and social policies will contribute to reducing inequalities. We endorse the Declaration of our Labour and Employment Ministers and commit to implementing its priorities to make labour markets more inclusive as outlined by the G20 Policy Priorities on Labour Income Share and Inequalities. We ask our Finance, and Labour and Employment Ministers to review our growth strategies and employment plans to strengthen our action against inequality and in support of inclusive growth. Recognizing that social dialogue is essential to advance our goals, we welcome the B20 and L20 joint statement on jobs, growth and decent work.
7. Unemployment, underemployment and informal jobs are significant sources of inequality in many countries and can undermine the future growth prospects of our economies. We are focused on promoting more and better quality jobs in line with our G20 Framework on Promoting Quality Jobs and on improving and investing in skills through our G20 Skills Strategy. We are determined to support the better integration of our young people into the labour market including through the promotion of entrepreneurship. Building on our previous commitments and taking into account our national circumstances, we agree to the G20 goal of reducing the share of young people who are most at risk of being permanently left behind in the labour market by 15% by 2025 in G20 countries. We ask the OECD and the ILO to assist us in monitoring progress in achieving this goal. We will continue monitoring the implementation of our Employment Plans as well as our goals to reduce the gender participation gap and to foster safer and healthier workplaces also within sustainable global supply chains.
8. We will address current opportunities and challenges brought into the labour markets through such issues as international labour mobility and the ageing of populations. Domestic labour mobility is an important labour market issue in some G20 countries. We recognize and will further explore the potential of a flourishing silver economy. We further ask our Labour and Employment Ministers to report to us on progress made in 2016.
9. To provide a strong impetus to boost investment, particularly through private sector participation, we have developed ambitious country-specific investment strategies, which bring together concrete policies and actions to improve the investment ecosystem, foster efficient and quality infrastructure, including by the public sector, support small and medium sized enterprises (SMEs), and enhance knowledge sharing. Analysis by the OECD indicates that these strategies would contribute to lifting the aggregate G20 investment to GDP ratio, by an estimated 1 percentage point by 2018.
10. To improve our investment preparation, prioritization and execution processes, we have developed guidelines and best practices for public-private-partnership (PPP) models. We also considered alternative financing structures, including asset-based financing, and simple and transparent securitization to facilitate better intermediation for SMEs and infrastructure investment. Going forward, we call on our Ministers to continue their work to improve the investment ecosystem, promote long-term financing, foster institutional investors’ involvement, support the development of alternative capital market instruments and asset-based financing models, and encourage Multilateral Development Banks (MDBs) to mobilize their resources, optimize their balance sheets, and catalyze private sector funding. We are advancing efforts and developing toolkits to unlock the ways and means for countries to better prepare, prioritize and finance infrastructure projects. We expect the Global Infrastructure Hub to make a significant contribution towards these endeavors. To help ensure a strong corporate governance framework that will support private investment, we endorse the G20/OECD Principles of Corporate Governance. We have placed a special focus on promoting long-term financing for SMEs, and we welcome the Joint Action Plan on SME Financing, the G20/OECD High-Level Principles on SME Financing as guidance, and the establishment of the private sector-led World SME Forum, a new initiative that will serve as a global body to facilitate the contributions of SMEs to growth and employment.
11. Global trade and investment continue to be important engines of economic growth and development, generating employment and contributing to welfare and inclusive growth. We note that global trade growth remains below pre-crisis levels. This is a result of both cyclical and structural factors. We therefore reaffirm our strong commitment to better coordinate our efforts to reinforce trade and investment, including through our Adjusted Growth Strategies. Inclusive Global Value Chains (GVCs) are important drivers of world trade. We support policies that allow firms of all sizes, particularly SMEs, in countries at all levels of economic development to participate in and take full advantage of GVCs and encourage greater participation and value addition by developing countries. We further reaffirm our longstanding commitment to standstill and rollback on protectionist measures and will remain vigilant by monitoring our progress. For this, we ask the WTO, OECD and UNCTAD to continue their reporting on trade and investment restrictive measures. We ask our Trade Ministers to meet on a regular basis and we agree on a supporting working group.
12. The WTO is the backbone of the multilateral trading system and should continue to play a central role in promoting economic growth and development. We remain committed to a strong and efficient multilateral trading system and we reiterate our determination to work together to improve its functioning. We are committed to working together for a successful Nairobi Ministerial Meeting that has a balanced set of outcomes, including on the Doha Development Agenda, and provides clear guidance to post-Nairobi work. We will also need to increase our efforts to implement all the elements of the Bali Package, including those on agriculture, development, public stock holding as well as the prompt ratification and implementation of the Trade Facilitation Agreement. We will continue our efforts to ensure that our bilateral, regional and plurilateral trade agreements complement one another, are transparent and inclusive, are consistent with and contribute to a stronger multilateral trade system under WTO rules. We emphasize the important role of trade in global development efforts and will continue to support mechanisms such as aid for trade in developing countries in need of capacity building assistance.
Enhancing Resilience
13. Strengthening the resilience of financial institutions and enhancing stability of the financial system are crucial to sustaining growth and development. To enhance the resilience of the global financial system, we have completed further core elements of the financial reform agenda. In particular, as a key step towards ending too-big-to-fail, we have finalized the common international standard on total-loss-absorbing-capacity (TLAC) for global systemically important banks. We also agreed to the first version of higher loss absorbency requirements for global systemically important insurers.
14. Critical work remains to build a stronger and more resilient financial system. In particular, we look forward to further work on central counterparty resilience, recovery planning and resolvability and ask the FSB to report back to us by our next meeting. We will continue to monitor and, if necessary, address emerging risks and vulnerabilities in the financial system, many of which may arise outside the banking sector. In this regard, we will further strengthen oversight and regulation of shadow banking to ensure resilience of market-based finance, in a manner appropriate to the systemic risks posed. We look forward to further progress in assessing and addressing, as appropriate, the decline in correspondent banking services. We will expedite our efforts to make further progress in implementing the over-the-counter (OTC) derivatives’ reforms, including by encouraging jurisdictions to defer to each other, when it is justified in line with the St. Petersburg Declaration. Going forward, we are committed to full and consistent implementation of the global financial regulatory framework in line with the agreed timelines, and will continue to monitor and address uneven implementation across jurisdictions. We welcome the FSB’s first annual report on the implementation of reforms and their effects. We will continue to review the robustness of the global regulatory framework and to monitor and assess the implementation and effects of reforms and their continued consistency with our overall objectives, including by addressing any material unintended consequences, particularly for emerging markets and developing economies (EMDEs).
15. To reach a globally fair and modern international tax system, we endorse the package of measures developed under the ambitious G20/OECD Base Erosion and Profit Shifting (BEPS) project. Widespread and consistent implementation will be critical in the effectiveness of the project, in particular as regards the exchange of information on cross-border tax rulings. We, therefore, strongly urge the timely implementation of the project and encourage all countries and jurisdictions, including developing ones, to participate. To monitor the implementation of the BEPS project globally, we call on the OECD to develop an inclusive framework by early 2016 with the involvement of interested non-G20 countries and jurisdictions which commit to implement the BEPS project, including developing economies, on an equal footing. We welcome the efforts by the IMF, OECD, UN and WBG to provide appropriate technical assistance to interested developing economies in tackling the domestic resource mobilization challenges they face, including from BEPS. We acknowledge that interested non-G20 developing countries’ timing of implementation may differ from other countries and expect the OECD and other international organizations to ensure that their circumstances are appropriately addressed in the framework. We are progressing towards enhancing the transparency of our tax systems and we reaffirm our previous commitments to information exchange on-request as well as to automatic exchange of information by 2017 or end-2018. We invite other jurisdictions to join us. We support the efforts for strengthening developing economies’ engagement in the international tax agenda.
16. In support of our growth and resilience agenda, we remain committed to building a global culture of intolerance towards corruption through effectively implementing the 2015-2016 G20 Anti-Corruption Action Plan. We endorse the G20 High-Level Principles on Integrity and Transparency in the Private Sector which will help our companies comply with global standards on ethics and anti-corruption. Ensuring the integrity and transparency of our public sectors is essential. In this regard, we endorse the G20 Anti-Corruption Open Data Principles and the G20 Principles for Promoting Integrity in Public Procurement, and we welcome the ongoing work on asset disclosure frameworks. We will further work to strengthen international cooperation, including where appropriate and consistent with domestic legal systems, on civil and administrative procedures, as an important tool to effectively combat bribery and to support asset recovery and the denial of safe haven to corrupt officials and those who corrupt them. We welcome the publication of our Implementation Plans on beneficial ownership transparency and will continue our efforts in this regard.
17. We remain deeply disappointed with the continued delay in implementing the IMF quota and governance reforms agreed in 2010. The 2010 reforms remain our highest priority for the IMF and we urge the United States to ratify these reforms as soon as possible. Mindful of the aims of the 2010 reforms, we ask the IMF to complete its work on an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the 14th General Review of Quotas. The 14th Review should be used as a basis for work on the 15th Review, including a new quota formula. We reaffirm our commitment to maintaining a strong, quota-based and adequately resourced IMF. We reaffirm our agreement that the heads and senior leadership of all international financial institutions should be appointed through an open, transparent and merit-based process and we reiterate the importance of enhancing staff diversity in these organizations. We reaffirm that the Special Drawing Rights (SDR) basket composition should continue to reflect the role of currencies in the global trading and financial system and look forward to the completion of the review of the method of valuation of the SDR.
18. We welcome the progress achieved on the implementation of strengthened collective action and pari passu clauses in international sovereign bond contracts, which will contribute to the orderliness and predictability of sovereign debt restructuring processes. We ask the IMF, in consultation with other parties, to continue promoting the use of such clauses and to further explore market-based ways to speed up their incorporation in the outstanding stock of international sovereign debt. We look forward to the upcoming review of the IMF-WB Debt Sustainability Framework for Low-Income Countries. We acknowledge the existing initiatives aimed at improving sustainable financing practices, as stressed in the Addis Ababa Action Agenda. We also take note of the Paris Forum initiative, which contributes to further the inclusiveness by fostering dialogue between sovereign debtors and creditors.
Buttressing Sustainability
19. 2015 is a crucial year for sustainable development and we remain committed to ensuring our actions contribute to inclusive and sustainable growth, including in low income developing countries. The 2030 Agenda, including the Sustainable Development Goals (SDGs) and the Addis Ababa Action Agenda, sets a transformative, universal and ambitious framework for global development efforts. We are strongly committed to implementing its outcomes to ensure that no-one is left behind in our efforts to eradicate poverty and build an inclusive and sustainable future for all. We adopt the G20 and Low Income Developing Countries Framework to strengthen our dialogue and engagement on development. We will develop an action plan in 2016 to further align our work with the 2030 Agenda.
20. Our work this year supports key areas for sustainable development such as energy access, food security and nutrition, human resource development, quality infrastructure, financial inclusion and domestic resource mobilization. We endorse the G20 Action Plan on Food Security and Sustainable Food Systems, which underlines our commitment to improve global food security and nutrition and ensure the way we produce, consume and sell food is economically, socially and environmentally sustainable. We remain focused on promoting responsible investment in agriculture and food systems, improving market transparency, increasing incomes and quality jobs, and fostering sustainable productivity growth. We will pay particular attention to the needs of smallholder and family farmers, rural women and youth. We also commit to reducing food loss and waste globally. We welcome Expo Milano with the theme “Feeding the Planet. Energy for Life”. We also welcome our Agriculture Ministers’ decision to establish a new platform to improve the way we and other countries can measure and reduce food loss and waste.
21. The private sector has a strong role to play in development and poverty eradication. Through our G20 Call on Inclusive Business we stress the need of all stakeholders to work together in order to promote opportunities for low income people and communities to participate in markets as buyers, suppliers and consumers. Our G20 National Remittance Plans developed this year include concrete actions towards our commitment to reduce the global average cost of transferring remittances to five percent with a view to align with the SDGs and Addis Ababa Action Agenda. We are promoting financial inclusion by helping to open up access to payments, savings, credit and other services. We welcome the continued work on financial inclusion within the Global Partnership for Financial Inclusion (GPFI).
22. We remain focused on the G20 Principles on Energy Collaboration and welcome our Energy Ministers’ first meeting ever. Recognizing that globally over 1.1 billion people lack access to electricity and 2.9 billion rely on the traditional use of biomass for cooking, we endorse the G20 Energy Access Action Plan: Voluntary Collaboration on Energy Access, the first phase of which focuses on enhancing electricity access in Sub-Saharan Africa where the problem is most acute. The Plan aims to strengthen G20 coordination and establishes a long-term voluntary cooperation framework that can be applied to other regions over time, recognising that energy access is a critical factor to foster development. In this first phase, we will cooperate and collaborate with African countries and relevant regional and international organizations on policy and regulatory environments, technology development and deployment, investment and finance, capacity building, regional integration and cooperation, taking into consideration national needs and contexts.
23. We recognize that actions on energy, including improving energy efficiency, increasing investments in clean energy technologies and supporting related research and development activities will be important in tackling climate change and its effects. We endorse the G20 Toolkit of Voluntary Options for Renewable Energy Deployment. We also highlight the progress made this year by participating countries in taking forward our collaboration on energy efficiency and agree to further support on a voluntary basis the 2015 outcomes of existing work streams on efficiency and emissions performance of vehicles, particularly heavy duty vehicles, networked devices, buildings, industrial processes and electricity generation, as well as financing for energy efficiency. We will continue to promote transparent, competitive and well-functioning energy markets, including gas markets. We stress the importance of diversification of energy sources and continued investments for increased energy security. We reaffirm our commitment to rationalise and phase-out inefficient fossil fuel subsidies that encourage wasteful consumption, over the medium term, recognising the need to support the poor. We will endeavour to make enhanced progress in moving forward this commitment. We ask our Energy Ministers to report back on energy collaboration again in 2016 on the continued implementation of the G20 Principles on Energy Collaboration.
24. Climate change is one of the greatest challenges of our time. We recognize that 2015 is a critical year that requires effective, strong and collective action on climate change and its effects. We reaffirm the below 20C goal as stated in the Lima Call for Action. We affirm our determination to adopt a protocol, another legal instrument or an agreed outcome with legal force under the UNFCCC that is applicable to all Parties. Our actions will support growth and sustainable development. We affirm that the Paris agreement should be fair, balanced, ambitious, durable and dynamic. We underscore our commitment to reaching an ambitious agreement in Paris that reflects the principle of common but differentiated responsibilities and respective capabilities, in light of different national circumstances. We reaffirm that UNFCCC is the primary international intergovernmental body for negotiating climate change. We welcome that over 160 Parties including all G20 countries have submitted their Intended Nationally Determined Contributions (INDCs) to the UNFCCC, and encourage others to do so in advance of the Paris Conference. We are prepared to implement our INDCs. We will instruct our negotiators to engage constructively and flexibly in the coming days to discuss key issues, among other things, mitigation, adaptation, finance, technology development and transfer and transparency in order to arrive at Paris with a way forward. We commit to work together for a successful outcome of the COP21.
25. The scale of the ongoing refugee crisis is a global concern with major humanitarian, political, social and economic consequences. There is a need for a coordinated and comprehensive response to tackle this crisis, as well as its long term consequences. We commit to continue further strengthening our support for all efforts to provide protection and assistance and to find durable solutions for the unprecedented numbers of refugees and internally displaced persons in various parts of the world. We call upon all states to contribute to responding to this crisis, and share in the burdens associated with it, including through refugee resettlement, other forms of humanitarian admission, humanitarian aid and efforts to ensure that refugees can access services, education and livelihood opportunities. We underline the need to address the root causes of displacement. We highlight, in this regard, the importance of political solutions to conflicts and increased cooperation for development. We also recognize the importance of creating conditions to enable refugees and internally displaced persons to safely and voluntarily return to their homes. We will work with other states to strengthen our long term preparedness and capacity to manage migration and refugee flows. We invite all states according to their individual capacities to scale up their assistance to relevant international organizations in order to enhance their capabilities to assist affected countries in dealing with this crisis. We encourage the private sector and individuals to also join in the international efforts to respond to the refugee crisis.
26. We are living in an age of Internet economy that brings both opportunities and challenges to global growth. We acknowledge that threats to the security of and in the use of ICTs, risk undermining our collective ability to use the Internet to bolster economic growth and development around the world. We commit ourselves to bridge the digital divide. In the ICT environment, just as elsewhere, states have a special responsibility to promote security, stability, and economic ties with other nations. In support of that objective, we affirm that no country should conduct or support ICT-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors. All states in ensuring the secure use of ICTs, should respect and protect the principles of freedom from unlawful and arbitrary interference of privacy, including in the context of digital communications. We also note the key role played by the United Nations in developing norms and in this context we welcome the 2015 report of the UN Group of Governmental Experts in the Field of Information and Telecommunications in the Context of International Security, affirm that international law, and in particular the UN Charter, is applicable to state conduct in the use of ICTs and commit ourselves to the view that all states should abide by norms of responsible state behaviour in the use of ICTs in accordance with UN resolution A/C.1/70/L.45. We are committed to help ensure an environment in which all actors are able to enjoy the benefits of secure use of ICTs.
Conclusion
27. We remain resolute to continue our collective action to lift actual and potential growth of our economies, support job creation, strengthen resilience, promote development and enhance inclusiveness of our policies. We thank Turkey for its G20 Presidency and hosting a successful Antalya Summit this year. We look forward to our next meeting in Hangzhou in September 2016 under the Chinese Presidency. We also look forward to meeting in Germany in 2017.
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2016 Budget Statement and Economic Policy of the Government of Ghana
The Budget Statement and Economic Policy of the Government of Ghana for the 2016 Financial year was presented to Parliament on Friday, 13th November, 2015 by Hon. Seth E. Terkper, Minister of Finance on the Authority of H. E. John Dramani Mahama, President of the Republic of Ghana.
Highlights from the Budget Speech
Rt. Hon. Speaker and Honourable Members of Parliament, on the authority of His Excellency John Dramani Mahama, President of the Republic of Ghana, I beg to move that this Honourable House approves the Financial Policy of the Government of Ghana for the year ending 31st December, 2016.
Mr Speaker, in 2012, H. E John Dramani Mahama was elected for his first four-year mandate to lead our dear country. Under his able leadership, the Government has been working tirelessly to transform the economy. We are focused on improving the well-being of Ghanaians by honouring the pledges made to the good people of Ghana in the 2012 Manifesto of the National Democratic Congress.
Notwithstanding the major shocks to the economy in the last three years, the government remained steadfast in pursuing the economic vision of leading the country through a transformational agenda to consolidate our Middle Income Country (MIC) status. The shocks include disruption in gas supply for two-and-a-half years and the simultaneous fall in cocoa, gold and crude oil prices.
We have also remained resolute in our commitment to correcting the major budget overruns which occurred at the end of the 2012 fiscal year. We are implementing several programmes to secure the bright medium-term prospects for the economy, notably through substantial investments in the oil and gas sector, among others.
2016 is significant in many respects. The country will go through Presidential and Parliamentary elections. Let me assure this House that the Electoral Commission and other governance institutions will be adequately resourced to ensure the conduct of free, fair and transparent elections. Despite being an election year, let me also reiterate President Mahama’s assurance of sustaining fiscal discipline whilst investing prudently in infrastructure and social development. We will resist the temptation of election year overspending.
The Post-Ho Forum held in Takoradi was successful. For the first time in decades, the government and its social partners, notably Organised Labour/Association and the Ghana Employers Association, led by their Secretary-General and President, respectively, concluded in September, the national minimum wage and public sector wage negotiations for the 2016 fiscal year ahead of the Budget. The essence of this remarkable achievement is to avoid any compensation related slippages or overruns, that could compromise our fiscal consolidation programme. It is also to shift focus of the Single Spine Pay Policy to aspects of productivity, in the context of the Public Financial Management (PFM) reforms related to payroll and human resource management.
The vision and commitment of Government over the medium term is to build a sustainable, prosperous and equitable society, in line with our social democratic agenda. This vision is anchored on the thematic areas of the Ghana Shared Growth and Development Agenda (GSGDA) II, 2014-2017 and, particularly, on the Government’s priority of:
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Putting People First;
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Building a Strong and Resilient Economy;
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Expanding Infrastructure; and
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Ensuring Transparent and Accountable Governance.
In our determination to transform the economy, we draw lessons from past experiences of our country’s economic journey including some paradoxes:
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Despite numerous and unexpected setbacks the country has experienced positive growth over the last 30 years;
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The declaration of HIPC status generated intense debate and many believed it could have been avoided with bold measures. Yet it provided us with fiscal space to help our path to positive growth;
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Contrast with the HIPC experience, it is relieving for this Government to be leading the development agenda that has restored our pride of place among the “African rising‟ and renaissance nations.
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The recent setbacks from commodity price shocks did not make us reverse our course on consolidation even as it reminded us of our vulnerability in transitioning to a MIC status;
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We are returning to another growth path and our fiscal performance so far clearly shows that we can plan to manage and reverse periodic setbacks as and when they occur.
Therefore, our resolve is to manage the transition setbacks and paradoxes with perseverance and effective planning. Consequently, we now see brighter prospects ahead, mainly from the investments that we have been making in the energy and other sectors of the economy.
Mr Speaker, permit me to recount some of the macroeconomic successes chalked up since we began the programme of fiscal consolidation under our “Home-Grown” policies and the IMF programme. In so doing, however, not even the successful first and second reviews under an IMF programme will make us complacent:
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There is a clear sign that our fiscal consolidation efforts are yielding positive results, making the economy more efficient. Accordingly, the GSS estimates that GDP will grow at 4.1 per cent at the end of 2015 compared to the 3.5 per cent initially projected;
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As a result of good revenue performance (including GRA’s Compliance efforts), containment of overruns in the wage bill and other spending; as well as withdrawal of energy-related subsidies, our fiscal consolidation programme is on course with the deficit set to be on target at 7.3 per cent;
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For the first time in many years, the domestic primary balance in the first half of 2015 achieved a surplus equivalent to 2.8 per cent of GDP, whilst the budget deficit was down to 2.3 per cent of GDP, same as the level attained a decade ago;
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The current account deficit as a percentage of GDP has stabilised whilst the foreign reserve position has significantly improved;
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In line with the government’s Medium Term Debt Strategy and Debt Management policies, the pace at which we have been accumulating public debt as a percentage of GDP has slowed down in the first half of the year;
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In October this year, we issued our fourth sovereign bond which was over-subscribed by US$1 billion, the 15-year tenor of the bond is the first by any Sub-Saharan African country besides South Africa;
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In this instance, Ghana is also leading its contemporaries in using a guarantee instrument that the World Bank wants to use to create an asset class for market assets by middle income countries;
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After some initial implementation difficulties, we are now on course to making the proceeds from commercial and quasi commercial projects, pay fully or partially for the loans that finance them; this will stop the unsustainable habit of relying on the taxpayer to pay for all the nation’s debt service commitments; and
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Against this background, Ghana successfully went through the first performance review in August 2015 under the three-year Extended Credit Facility (ECF) with the IMF. All performance criteria under the programme for the second review were also successfully met and documentations are being prepared for the IMF Board to complete the review in December 2015. Hence, Ghana continues to win the confidence of the business community, Development Partners and the international financial markets with our efficient management of the economy.
Mr Speaker, the achievements so far, are not just macroeconomic. We have made far-reaching and significant investments in all sectors of the economy and these have led to considerable improvements in the lives of our people. These include:
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Water: Following the huge investments made in the sector, 77.5 million gallons of water per day was added to the generation capacity as at the end of July 2015. By end of 2016, this should increase to 109.7 million gallons per day and will result in a coverage of 76 percent for both urban and rural communities.
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Roads: We made significant progress in funding and completing many of the “Gang of six” roads and launched the GH¢3 billion Cocoa Road Improvement Project; we have constructed thousands of kilometres of roads across the country. These include the Suhum-Apedwa and Kyebi town roads. Recent additions include the Kwame Nkrumah Interchange, the Fufulso-Sawla road, the Kasoa interchange and the Eastern corridor road.
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Transport: We are investing in the modernisation and expansion of the aviation and maritime infrastructure. These include the expansion of the Kotoka and Tamale International airports, the aerodrome in Ho, the expansion of the Tema harbour and provision of 116 buses for public road transport. Permit me to note that in line with our new debt management policies, the airport and harbour project are designed on self-financing basis.
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Communications: We have successfully deployed 800 kilometres optic fibre infrastructure which runs through 126 communities along the eastern corridor from Ho to Bawku with a link from Yendi to Tamale. The fixed and mobile telephony and Internet subscriptions as at August 2015 stood at over 33 million and 17 million, respectively.
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Housing: Through a combination of direct government investments and public private partnerships, an aggressive housing programme has been rolled out to provide more Ghanaian families in the lower to middle-income brackets with decent homes. About 18,000 housing units are at different stages of completion; and
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Energy: We are bringing on stream 845 MW of power to add to the generation capacity by the close of the year and providing the necessary investments and guarantees to permanently address our perennial power generation shortfall.
These investments have not only provided critical social services to improve the lives of our people, they have resulted in the creation of tens of thousands of jobs for the youth.
Notwithstanding these successes, we are mindful of the fact that some risks to the budget and medium-term macroeconomic projections persist and new ones could emerge. The major global and domestic setbacks include:
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The tumbling of crude oil prices to a low of US$45.0 per barrel compared to a bench mark revenue projection of US$99.38 per barrel in the 2015 Budget. Mr Speaker, it will be recalled that this prompted the government to revise its revenue targets and related expenditures that were to be funded from the Annual Budget Funding Amount (ABFA);
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Gold spot price is yet to recover and even though cocoa prices are now recovering, prices and output keep fluctuating on the global markets. We have had to sacrifice government revenue in some years to fulfil our commitment to improve the welfare of farmers;
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The US economic recovery and appreciation of the dollar, coupled with pressures on our foreign exchange reserves from declining commodity prices, continue to weaken the Cedi, thus making imports more expensive; this is fuelling inflationary pressures and increasing the external debt service burden in Cedi terms;
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The global financial uncertainty that hit emerging and peripheral economies, including Ghana, pushed us into headwinds at the time of issuing the 2015 sovereign bond. We managed to navigate the turbulence, and in the process, added to our store of experience. As a middle-income Country, we will be in the capital and financial markets in both good and bad times;
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Concessional terms of some facilities from Bilateral and Multilateral Partners including the WB and AfDB have hardened. The WB, AfDB and other lenders also changed the repayment period of facilities to Ghana whilst interest payments and financial costs have increased (e.g. the repayment period has reduced from 40 to 25 years). The basis for calculating loan concessionality to include commitments and risks of floating exchange rates has also changed;
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The disruption in gas supply and the low level of water in the Bui, Akosombo and Kpong dams due to climate change continues to pose power supply challenges, reduction in generation capacity and recurring power outages. However, it is now clear that investments in the sector is rapidly changing the situation; and
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Finally, the recommended overall budget deficit target of 5.3 per cent of GDP, under the IMF Extended Credit Facility (ECF) programme , provides a tighter fiscal space than anticipated in the original programme. It is against this background that we must even be more prudent in 2016 and avoid the consequential cycle of huge election year budget overruns and deficit. And in this regard, we call on all social partners especially, organised labour, to support the Government.
We will focus on these risks and adopt appropriate measures to minimise their likely adverse impacts on the economy. Our approach is not to bemoan our challenges, offer excuses or fail to act decisively. Instead, over the years we have come to this august House with several structural initiatives and strategies to change the way we manage the economy.
In particular, the national debt and consequent burden of debt service will continue to rise only if we do not emulate the success with which many Middle Income and Advanced countries finance infrastructural, economic and social development on a sustainable basis. To this end, the Government will continue to implement the debt management measures that were approved by this House. As noted earlier, as a result of these measures, the public debt is now increasing at a slower pace.
Secondly, we have always bemoaned our narrow export base and the resultant depreciation of the Cedi when we lose reserves from falling commodity prices. As part of our transformational agenda to achieve an export-led economy, the Ghana Export and Import Bank (EXIM) Bill has been laid before Parliament. The primary purpose is to finance export (notably high industrial and agricultural products); guarantee loans; provide export insurance, support SMEs and other businesses, and strengthen economic cooperation. The operations of the Bank will support the nurturing and growth of the private sector in Ghana to address the longstanding problem of access to credit for expanded exports.
Rt. Hon. Speaker, the 2016 Budget will build on the foundation laid to restructure and transform the economy towards sustained and inclusive growth; minimise our exposure to volatilities; and position Ghana to consolidate its status as a Middle Income Country.
Thirdly, it is our expectation that the investments by the public and private sectors including the emergency power; World Bank PRG for Sankofa field; commissioning of FPSO J.E.A Mills for the TEN fields; and onset of Jubilee Gas will contribute to the positive outlook embodied in the theme for the 2016 Budget Statement and Economic Policy: “Consolidating Progress towards a Brighter Medium Term”.
GLOBAL ECONOMIC DEVELOPMENTS
Growth
According to the IMF’s October 2015 World Economic Outlook (WEO), global growth in the first half of 2015 was 2.9 per cent, 0.3 percentage point lower than projected in April of this year. This reflects lower than expected recovery in advanced countries and further slowdown in emerging market economies for the fifth consecutive year. The declines suggest that medium-term and long-term challenges including low productivity growth since the previous financial crisis; and the current financial sector weakness, low investment, growth realignment in China and the downturn in commodity prices still exist.
Global growth is projected at 3.1 per cent for 2015, which is 0.3 of a percentage point lower than the outturn in 2014 and 0.3 percentage point below the April 2015 forecast. In 2016, global growth is expected to strengthen at 3.6 percent reflecting a rebound in economic activity in a number of distressed economies. Advanced economies are expected to grow at 2.2 per cent while developing and emerging economies are projected to grow at 4.5 per cent.
Sub-Saharan Africa experienced a robust economic growth of 5.0 per cent in 2014 driven by strong investment in mining and infrastructure as well as strong private consumption, especially in low-income countries. Economic growth is, however, expected to decelerate in 2015 to 3.8 per cent according to the 2015 October WEO, compared to the 4.5 per cent forecasted in July 2015. The slowdown mainly reflects the impact of declining oil prices on the economies of oil exporting countries, as well as lower demand from China (the largest single trade partner of sub-Saharan Africa), and the impact of Ebola on affected countries. Growth is expected to pick up in 2016 to 4.3 per cent.
Commodity prices
Oil prices have declined significantly, after experiencing large swings in the second quarter of 2015. The decline is on account of strong supply from members of the Organization of the Petroleum Exporting Countries (OPEC) and the Islamic Republic of Iran’s nuclear deal. Global excess supply of oil has continued to increase in 2015, in spite of the fall in investment in the oil sector.
Crude oil prices reached US$59.82 a barrel in June 2015 and fell further to US$42.46 a barrel in September 2015 compared to Ghana’s annual benchmark revenue projection of US$99.38 a barrel for 2015 which was later revised to US$57 per barrel. However, the IMF’s October 2015 WEO projects an average crude oil price of US$51.62 a barrel in 2015, US$50.36 in 2016, and US$55.42 in 2017.
Cocoa prices rose in the second quarter of 2015 as a result of weather-related supply shortfalls in Ghana, but demand remains strong. According to the Business Monitor International report of October 2015, cocoa prices are expected to peak in 2015 before lowering in the beginning of 2016 to the end of the forecast period in 2019. The market is projected to register a small surplus in the 2015/16 season, on account of: (1) a rebound of production in Ghana, due to greater use of inputs and expectations for better weather and (2) weak growth in global demand in 2016, as grinding margins remain poor.
According to the ICBC Standard Bank estimates, gold prices are generally expected to trend downwards peaking around $1,160 per ounce in 2016 as the Federal Open Market Committee (FOMC) normalises US monetary policy.
ECOWAS Trade Liberalization Scheme (ETLS)
The ECOWAS Trade Liberalisation Scheme (ETLS) seeks to provide impetus to the process of economic integration and development in the West African sub-region. It is expected to provide easier access to markets in other ECOWAS countries and thereby encourage local manufacturing outfits to compete favourably with cheap imported products. The scheme is also expected to encourage entrepreneurial development through the provision of preferential treatment in specific areas among member states.
Ghana’s export to the sub-region, under the ETLS, has seen a steady increase over the years. The ETLS has offered Ghanaian export manufacturers the opportunity to expand their market share in the Community. For example, the number of ECOWAS certificates of origin issued increased from a little over 3,000 in 2012 to 4,286 in 2013 and 5,951 in 2014. Trade between Ghana and Nigeria has improved over the period. Export to Nigeria stood at GH¢365.6 million as at June 2015 compared to an estimate of GH¢210.7 million as at June 2014. The scheme has also introduced competition among community industries leading to reasonable product price to the consumer.
However, in spite of the regional backing and benefits that accrue to member countries, its objectives to a large extent have not been achieved. Both tariff and non-tariff barriers to trade between member states still persist. While some progress has been made in reducing tariffs, they have not been fully eliminated. Progress towards removing non-tariff barriers, such as seasonal import and export bans, has been slower. The failure to implement the instruments on the ECOWAS Trade Liberalization Scheme (ETLS) is affecting economic growth in the sub-region. There is the urgent need for the removal of bottlenecks impeding the implementation of ECOWAS protocols.
The screening and updating of the current database of Ghanaian companies with ETLS status is ongoing and is expected to be completed by June 30, 2016. Since the beginning of 2015, about 18 Ghanaian industrial companies have been given approval to benefit from the scheme. Ghana will continue to vigorously pursue the implementation of the ETLS.
Revised Road map for the Second Single Monetary Zone
The Authority of Heads of State and Government in June 2007 directed the Commission to re-examine the monetary integration process and expedite the process of creating a common currency for ECOWAS. The implementation of this directive led to the development of the roadmap for the ECOWAS Single Currency Programme by the ECOWAS Convergence Council on 25th May 2009. The roadmap had two major milestones: West African Monetary Zone (WAMZ) in 2015, and a Common Currency in 2020 for the ECOWAS single currency.
However, a one-track approach has been adopted for the achievement of a single currency by 2020 and a related costed roadmap has been developed. One key component of the roadmap is the establishment of an ECOWAS Monetary Institute (EMI) by January 2018.
MACROECONOMIC PERFORMANCE FOR 2015: REAL SECTOR
Provisional data from the Ghana Statistical Service (GSS) show real GDP is expected to grow by 4.1 per cent in 2015, representing a slight increase from the revised figure of 4.0 per cent recorded in 2014 and the revised 2015 Mid-Year GDP growth target of 3.5 per cent.
The GSS data pegs Industry Sector growth at 9.1 percent, followed by the Services Sector (4.7%) and Agriculture Sector (0.04%).
Agriculture Sector
All subsectors in the Agriculture Sector, apart from the Crops subsector, are expected to record positive growth rates in 2015, led by the Livestock and Fishing subsectors. Agriculture, however, is expected to register a growth of 0.04 per cent, a decline from the revised target of 3.6 per cent recorded. The Crops subsector, in spite of being the only subsector that is expected to record a negative growth, will be the source of this decline on account of the subsector’s large weight.
Industry Sector
Growth in the Industry Sector is expected to be driven by strong growth performances in the Construction and Water and Sewerage sub-sectors. These sub-sectors are expected to record growth rates of 30.6 per cent and 15.6 per cent, respectively. This is in stark contrast to their performances in 2014 when Construction stagnated, and Water and Sewerage contracted. Manufacturing and Mining and Quarrying, are both expected to record negative growth rates. However, petroleum, which is a part of the latter, is expected to record a growth of 2.0 percent.
Services Sector
Mr Speaker, the provisional data indicate that seven out of 10 service sub-sectors are expected to record positive growth rates. The Public Administration & Defence, Social Security sub-sector is expected to record a growth rate of 20.3 per cent, the highest among all the sub-sectors. The next highest growth performers will be Financial Intermediation and Information and Communication subsectors. Transport and Storage is expected to record the highest contraction of -6.3 per cent, in contrast to the modest positive growth of 0.3 per cent it recorded in 2014.
Structure of the Economy
The Services sector is expected to increase its share of GDP from 51.9 per cent in 2014, to 54.1 per cent in 2015, according to the provisional data. Industry will have a share of 26.9 percent, which represents a slight increase from the 26.6 per cent recorded in 2014. The expansion in the shares of Services and Industry will be at the expense of Agriculture, which is expected to record a share of 19.0 per cent in 2015, as compared with the 21.5 per cent it recorded in 2014.
MONETARY SECTOR DEVELOPMENTS
External Sector
The provisional trade balance showed a deficit of US$2.3 billion at the end of September 2015, compared to a deficit of US$710.7 million recorded for the same period in 2014, due to worsening commodity prices, lower production volumes and the declines in exports.
The country’s Gross Foreign Assets (GFA) stood at US$4.5 billion at the end of September 2015, sufficient to cover 2.89 months of import. It is projected to rise to US$6.5 billion at the end of 2015, sufficient to cover 4.0 months of imports of goods and services.
The key lessons from our macroeconomic performance and fiscal consolidation to date include:
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the need to continue building buffers such as the Stabilisation Fund and its derivative Contingency and Sinking Funds;
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the need for budget discipline, notably keeping expenditures within budget allotments;
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continuing to evolve a debt management strategy that will make our investments in infrastructure sustainable;
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protecting social intervention programmes in our quest to anchor our development on inclusive growth; and
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the need to continue to realign expenditures to ensure a judicious balance among compensation, goods and services, debt service, transfers and capital.
MACROECONOMIC TARGETS FOR THE MEDIUM-TERM AND 2016
The macroeconomic targets for 2016 are as follows:
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overall real GDP (including oil) growth of 5.4 percent;
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non-oil real GDP growth of 5.2 percent;
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an end year inflation target of 10.1 percent;
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overall budget deficit equivalent to 5.3 percent of GDP; and
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gross international reserves of not less than 3 months of import cover of goods and services.
In addition to the fiscal measures we have been implementing since 2013, the following revenue enhancing and expenditure rationalization measures, among others, will be reinforced over the short to medium term to ensure the achievement of the nation’s fiscal objectives:
- the implementation of the ECOWAS Common External Tariff (CET);
- the implementation of the Income Tax Act, 2015 (Act 896);
- continuing the realignment of Statutory Funds to address the increasing rigidities in the budget;
- alignment of a minimum of 15 percent of IGFs for use by respective sector Ministries and/or umbrella organisations to fund programmed activities; and
- weaning-off of at least four subvented agencies from government subvention.
Resource Mobilization for 2016
Using the seven-year moving average formula for projecting the benchmark crude oil price for oil revenue estimation as stipulated in the PRMA, 2011 (Act 815), the 2016 benchmark crude oil price is estimated at US$86.04 per barrel. This is completely above recent crude oil price projections by reputable sources such as ICE/Bloomberg and the IMF. Therefore, consistent with Section 17 of the PRMA (amendment) Act, 2015 (Act 893), we propose an alternative crude oil benchmark price of US$53.05 per barrel, in line with the IMF WEO crude oil price forecast for 2016.
Total revenue and grants including petroleum for the 2016 fiscal year is estimated at GH¢38.0 billion (24.0 percent of GDP), indicating an 18.2 percent increase over the projected outturn for 2015.
Total non-petroleum revenue and grants for the 2016 fiscal year is estimated at GH¢36.0 billion, equivalent to 24.1 percent of non-oil GDP representing 17.6 percent increase over the projected outturn for 2015.
For the 2016 fiscal year, total receipts from petroleum is estimated at GH¢2.0 billion (1.3 percent of GDP), representing a 15.9 percent increase over the projected outturn for 2015.
Domestic revenue, made up of tax and non-tax revenue is estimated at GH¢37.1 billion, 23.8 percent higher than the projected outturn for 2015.
Total tax revenue is estimated at GH¢29.9 billion, representing 18.9 percent of GDP. This shows an increase of 22.2 percent over the projected outturn for 2015. Of this amount, non-petroleum tax revenue is estimated to grow by 22.4 percent to GH¢29,311.4 million, equivalent to 19.6 percent of non-oil GDP.
Taxes on goods and services are estimated at GH¢11.3 billion, representing 18.7 percent increase over the projected outturn for 2015 and 37.9 percent of the estimated total tax revenue for 2016.
The taxes on goods and services is made up of GH¢7.0 billion for total VAT, while Excise taxes, National Health Insurance Levy and Communication Service tax are expected to yield GH¢2.9 billion, GH¢1.1 billion and GH¢313.6 million, respectively.
International Trade taxes, are estimated at GH¢6.5 billion or 4.1 percent of GDP and 21.7 percent of total tax revenue. The estimate reflects a 19.5 percent increase over the projected outturn for 2015. The increase is expected to be largely driven by the growth in import duties of 33.7 percent due partly from the impact of the implementation of the ECOWAS Common External Tariff.
Mr. Speaker, Non-tax revenue, comprising mainly fees and charges by Ministries, Departments and Agencies (MDAs), dividend received from public enterprises and other internally-generated funds (IGFs) is estimated at GH¢6.9 billion, equivalent to 4.3 percent of GDP and representing 18.5 percent of domestic revenue. An amount of GH¢3.2 billion is expected to be retained by MDAs for the funding of their activities and the rest lodged into the Consolidated Fund. Of the total non-tax revenue, an amount of GH¢1.5 billion is estimated as non-tax petroleum revenue.
Grants from Development Partners are estimated at GH¢1.6 billion, equivalent to 1.0 percent of GDP. The expected grants constitutes 4.2 percent to the estimated total revenue and grants for 2016.
Overall Budget Balance and Financing for 2016
Based on the revenue and expenditure estimates, the 2016 budget will result in an overall budget deficit of GH¢8.4 billion, equivalent to 5.3 percent of GDP.
We propose to finance the deficit from both domestic and foreign sources. Net Domestic Financing is estimated at GH¢5.5 billion, equivalent to 3.5 percent of GDP, and financing from foreign sources are estimated at GH¢3.3 billion, equivalent to 2.1 percent of GDP. An amount of GH¢434.4 million, equivalent to 0.3 percent of GDP is estimated to be saved in the Ghana Petroleum Funds, the Sinking Fund and the Contingency Fund.
SECTORAL PERFORMANCE AND OUTLOOK: TRADE AND INDUSTRY
Under the trade development programme, a strategy document was developed to enable Ghana maximize benefits from the implementation of the Economic Partnership Agreement (EPA).
Government also signed an MOU to expand bilateral trade and investment cooperation under the new US Trade Africa Initiative. The purpose is to strengthen anti-dumping measures to deal with unfair trade practices in line with WTO rules. Government also engaged in bilateral trade agreements with strategic countries including United Kingdom, Kenya, Belgium, Togo, Vietnam, Chile and the Czech Republic to take advantage of business opportunities as well as encourage foreign direct trade investments.
In 2016, under the bilateral cooperation arrangements with UK, Kenya, Belgium and other countries, the Ministry will build capacity to support Ghanaian exporters meet Sanitary and Phyto-Sanitary (SPS) requirements and deal effectively with Technical Barriers to Trade (TBT) in key trading partner markets.
A Made-in-Ghana Logo to serve as a seal of quality and excellence was launched as part of the Made-in-Ghana promotion. The scope of the programme was expanded to include sugar, rice and poultry.
Under the industrial development programme, government identified shea nut, soya beans, cassava, cotton and groundnut for large scale commercial cultivation to promote the development of adequate agricultural raw material base for local manufacturing activities.
The construction of the Komenda Sugar factory is about 70 percent complete and will become fully operational in 2016. The Ministry through PPP arrangements will establish another sugar factory with irrigation facility in Savelugu in the Northern Region.
POLICY INITIATIVES
Government is committed to promoting fiscal discipline through prudent public expenditure management, improved debt management and the implementation of reforms in key areas of the economy.
Our middle income status requires the country to rely increasingly on domestic resource mobilization and effective debt strategies to meet its development needs. The pursuit of this agenda takes account of persistent budget deficits; the dwindling access to concessional financing; and domestic resource mobilisation requirements under the Financing for Development (FfD) component of the Sustainable Development Goals (SDGs).
Over the past three years, we have pursued a number of policy initiatives, including:
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address the macroeconomic and budget imbalances that crystalized at the end of 2012;
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deal with the new challenges of financing our development through a sustainable debt management strategy;
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consolidate our transition to middle income country (MIC) status through deep institutional and structural reforms; and
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enable government deliver on its transformational agenda
I would like to present an update of some key initiatives and outline a few new ones for 2016.
Tax Policy and Administration
Improvements in the tax revenue effort have been constrained by the fall in commodity prices and power supply challenges that led to a slowdown in the growth of business activity in the economy. Additionally, Ghana has high tax exemptions regime, collection leakages, low compliance, inadequate taxpayer information and weak linkages among public agencies.
To enhance resource mobilization to close the funding gap, government introduced a number of tax policy and administration initiatives. The overarching goal was to create additional fiscal space for sustainable budget expenditures in ways that are more efficient, fairer and better promote good governance. Most of the policies were also to enhance efficiency in tax administration, compliance and increase tax revenue.
Common External Tariff
Ghana continues to work towards the implementation of the ECOWAS Common External Tariff (CET) which is a major platform for the region’s Customs Union that will facilitate free trade and ensure greater economic integration within the region. Ghana has completed several activities to ensure the smooth implementation of the new regional tariff early next year. The CET Bill is currently before this august House for consideration.
The passage of the Bill will enable Ghana join the other eight countries already implementing the CET. The CET when implemented would also help address the problem of cross-border smuggling, combat dumping and also bring economic benefits to the people of the sub-region.
For 2016 and the medium term, the following additional general tax administration measures will be implemented to ensure compliance with the Law and assistance to taxpayers:
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Continue to move all processes to an electronic platform and accelerating the shift to a functional form of administration in all tax offices;
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reviewing the current thresholds for classification of persons as large, medium or small to reflect current trends;
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establishing joint audit/investigation teams with membership drawn from both Domestic Tax Revenue Division (DTRD) and Customs Division to conduct audits and investigations;
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intensifying the monitoring of Free Zones Enterprises by rolling out the Integrated Free Zones Unit in line with the 2nd GRA Strategic Plan 2015-2017;
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fully rolling out the excise tax stamp project and implementing the Electronic Point of Sale device project for taxable supplies of goods and services;
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scaling up the use of third party information/data, particularly those from the Ghana Customs Management System (GCMS), TRIPS customs system; and
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GIFMIS data to follow up on importers and Government suppliers to ensure full accountability in respect of domestic taxes; and Implementing measures to address revenue leakages resulting from illicit financial flows.
Other policy measures being proposed include:
National Single Window
In September 2015, Government introduced the National Single Window Project to;
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reduce the time and cost of Customs clearance and in general that of doing business in the country;
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put all customs operations, notably classification, valuation and inspection, under the GRA; and
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improve government revenue through the harmonization and simplification of international trade processes and procedures.
The first phase of the Project has been completed. This includes the takeover of the core functions and allied services of valuation, inspection, classification and risk management from the Destination Inspection Companies by the Customs Division of the GRA. The completion of this phase also places Customs practice within the World Customs Organization’s recommendation of separating core customs operations from support services. The full deployment of the Customs Pre-Arrival Assessment Report System has been successfully executed and we commend all stakeholders for their cooperation.
Government will impose sanctions on Agents and Declarants who feed the Customs Classification and Valuation Report system with fictitious information in an attempt to defraud the state.
The second phase focuses on the full integration or interface of all services related to customs clearance with the National Single Window. A blue print will be developed for the implementation of the National Single Window.
Financial Sector
Infrastructure Development Initiatives
Government recognises infrastructure development as a key ingredient in the country’s transition and development agenda. Having attained a MIC status in 2010, conscious efforts are being made to expand, upgrade and modernize our social and economic infrastructure, with the aim of closing the wide infrastructure gap, estimated at about US$1.5 billion per annum.
Over the past three years the following initiatives have been implemented.
- National Infrastructure Plan: A draft National Infrastructure Plan has been developed by the National Development Planning Commission (NDPC) in collaboration with the Ministry of Finance. The plan will link naturally to the Public Investment Management System (PIMS) that the MoF is launching as part of the GIFMIS-Budget system. Public Private Partnerships
- Government has also adopted the PPP approach to financing infrastructure development, following Cabinet’s approval of the Policy, a PPP Bill is being finalised to be laid before Parliament. The feasibility studies have been conducted on at least 18 PPP projects whilst a number of them are at various stages of completion.
- Ghana Infrastructure Investment Fund (GIIF): The GIIF, was set up as a quasi-fiscal body to deal with the huge infrastructure deficit and to focus on strategic infrastructure that will stimulate the growth of the economy and lead to job creation following the passage of the Ghana Infrastructure Investment Fund Act, 2014 (Act 877).
The Board and the Advisory Council of the GIIF as well as management are in place. In addition, a GIIF Debt Service Account has been opened at the BoG for designated domestic and sovereign debt.
The Ministry of Finance is in the process of transferring projects that are commercially viable to the GIIF for management. Proposals have also been submitted to the GIIF Board to finance a number of fuel tanks as part of the strategic steps in the decentralisation of petroleum prices.
Under the proposal approved by Cabinet, for construction of the Airport City (Phase II), the land rights will be vested in GIIF which will then enter into appropriate commercial arrangements with the developers.
CONCLUSION
The interventions outlined in this Budget will no doubt contribute significantly to the realisation of our brighter medium term prospects.
Indeed, we have produced tangible results in the following broad areas:
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strategically encouraged investment in agriculture in order to reduce the importation of rice and poultry in particular to save our currency from dipping further and also implemented other measures to stabilize the Cedi;
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improved upon our road, rail and aviation networks; expanded access to potable water throughout the country; expanded and upgraded our ports to improve service delivery and handle more cargo; improved upon our ICT infrastructure; and provided quality affordable housing; provided decent office accommodation for Honourable members by completing the refurbishment and inaugurating the Job 600;
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we have expanded emergency services; and improved upon regulation of the sector; we have and will continue to improve health service delivery by constructing, expanding and upgrading of teaching, regional and district hospitals as well as polyclinics, CHPS compounds; · in our resolve to eradicate schools under trees and improve access to education, we have replaced 1,714 out of 2,578 schools under trees with decent accommodation and facilities; started the implementation of the progressively free SHS; procured and distributed free school uniforms and other educational materials; and expanded the school feeding programme which will continue in 2016;
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we are expanding and upgrading the power generation system, transmission and distribution networks to completely address the perennial supply challenges we face as a country as well as exploiting renewable energy sources;
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we have expanded the LEAP programme to cover over 190,000 households and the cash grant per head increased from GH¢36.00 to GH¢44.00. The programme will be expanded in 2016 to cover 250,000 households;
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we continued to invest in human capital and increased access to vocational training for the old and young alike; developed a Human Resource Policy Framework and Manual to improve human resource management and development in the public service; improved the Performance Management System; and introduced a comprehensive Human Resource Management Information System to improve performance and productivity in the Public Service;
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we have strengthened public protection of our citizens and improved upon general security in the country. We will ensure that human lives and property are protected before, during and after the 2016 general elections;
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as part of the wide ranging structural reforms hinged on our “Home Grown Policies” and consolidated by the IMF programme, we have commenced the process for the preparation of the new PFM Bill to strengthen our Public Financial Management reforms and system;
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we are taking steps at bolstering our infrastructure by setting up the GIIF to take on huge but economically viable capital infrastructure that cannot be sustained on the budget.
The 2016 budget is about following through the transformational agenda of the Government with strategic action. Having assessed the global and domestic challenges facing our economy, we have explored the opportunities and taken bold steps at bracing the storm.
We cannot sustain these developments and move confidently to a MIC status in a business as usual way. We are being creative and innovative. 231. We have taken our vision of “Changing Lives and Transforming Ghana” from the drawing board to the real world, where each strategy is being applied, appraised, adjusted and advanced to ensure that our actions produce the desired results. We have laid foundations to move forward as a country to succeed on many fronts.
We are clearly on track to achieving our goals and the evidence justifies our bold new approach. The results are crystal clear and we are committed to consolidating the gains towards a brighter future as embodied in the theme for the Budget “Consolidating Progress towards a Brighter Medium Term”.
In 2016, we will be seeking another mandate to continue leading the on-going development process of our beloved country. We will stand proudly before our people with confidence in our choices and results achieved so far, and we will ask once again for their mandate and cooperation as we move forward to complete the job we started together.
Related News
Africa has the world’s fastest-growing labor force but needs jobs growth to catch up
Over the last five years, Africa has seen the highest rate of population growth at about 2.5% annually and by 2050 a quarter of the world’s population will be on the continent.
Put another way, of the 2.4 billion new people on the planet by 2050, 1.3 billion of them will come from the continent, based on data from the UN World Population Prospects.
The increase in population, which will also be accompanied by lower mortality rates, presents the continent with an enormous opportunity, similar to the one experienced by East Asia in the second half of the twentieth century. The so-called demographic dividend is now upon Africa as well, economists say. By 2050 ten of the youngest countries in the world will be found on the continent.
The new working-age population such an explosion will generate could to lead to a 11% to 15% GDP growth on the continent, World Bank analysts argue. This is the same as doubling the current rate of growth in the region.
The poverty reduction that will accompany this growth will be transformative. The poverty rate, taken to be those living under $1.25 a day, which in 2007 made up about 52% of Africans, could fall by 17% by 2030, constituting up to 60 million less poor people.
But the question remains, will African countries be able to leverage this opportunity? The growing workforce bulge will need to be met with jobs so as to generate the kind of wealth that can fuel this kind of economic growth. At the moment, evidence suggests the continent has struggled in this regard. As Quartz has reported before, in the last 23 years, for example, youth labor participation in Africa has been negligible. The continent has struggled to create jobs in particular for the most educated of its young people.
Overall, between 2000-2007, the working age population in Africa grew at 2.6% annually creating 96 million working-age people along the way. But during that time, only 63 million jobs were created. That’s a significant gap. Additionally, there are 10 to 12 million young people entering the job market annually. But they are faced with a private sector that is too small to absorb them, analysts point out. The region has seen some of the highest rates of investment recently. But, there are still doubts that the region can generate enough jobs to meet the growing population surge. It doesn’t help, also, that the continent is one of the toughest places to do business which makes it even harder for a robust private sector to emerge that can absorb the growing labor force.
But the potential is there. To meet it, African countries need to create the conditions for it to be realized. First, create better incentives for the private sector to flourish so it can create the much needed jobs. Second, deepen investment in a skilled workforce that can take over these jobs. Projections suggest that education could be that silver bullet for the continent. “In a scenario where educational attainment is assumed to improve, such that the skill share of Africa’s labor supply doubles by 2030, Africa’s poverty rate could be as low as 13%,” the World Bank says
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African leaders re-commit to fast-tracking Africa’s high impact regional infrastructure projects
Accelerating infrastructure development across the continent should be a key focus of Africa’s drive toward sustainable development, delegates heard in Abidjan on Friday.
More than 150 participants, including senior government representatives, continental organizations and experts, gathered in the Ivorian capital for the first-ever Programme for Infrastructure Development in Africa (PIDA) – a week-long meeting that aims to shine the spotlight on Africa’s collective push toward developing large-scale infrastructure projects to further strengthen regional integration.
Delegates agreed that the essential benefit of regional infrastructure is to make possible the formation of large, competitive markets in place of the present collection of small, isolated, and inefficient ones.
In his remarks, CEO of the NEPAD Agency Dr Ibrahim Mayaki highlighted that whilst the meeting was ostensibly about the development of infrastructure which would facilitate economic growth, participants should recognise that regional integration was a key stabilising factor for the continent. “It is not about building roads, dams, bridges or ports. Infrastructure is the means for socio-economic development and creating jobs that will lead to stability,” he said.
Dr Mayaki cautioned that while Africa had significantly grown in the past ten years due to good governance and sound macro-economic policies, Africa required inclusive double digit growth and could no longer rely on its natural resources and official development assistance (ODA).
“The boom of raw materials has come to an end and ODA will disappear in the near future. The main challenge that we are facing now is that Africa’s growth has been a job-less growth. We need to address the issue of creating jobs for the youth. The next ten years of Africa must be about transformation and not re-marginalisation,” he underscored.
Dr Mayaki commended the progress made in the implementation of regional infrastructure projects on the ground. He singled out the Abidjan-Lagos-Transport Corridor, Zambia-Tanzania-Kenya (ZTK) Transmission Line, African Renaissance Dam and the Central Corridor which spans across the Democratic Republic of Congo (DRC), Rwanda, Uganda, Burundi and Tanzania. The four projects are part of PIDA’s 51 priority projects, which cover transport, energy, ICT and trans-boundary water sectors, and are jointly fast-tracked by the African Union Commission (AUC), NEPAD Agency and African Development Bank (AfDB).
Dr Mayaki also welcomed the achievements made in accelerating the implementation of PIDA projects by addressing PIDA’s main bottlenecks. These include insufficient project preparation capacity, a lack of funding for project preparation, a lack of funding for projects and inadequate dialogue with the private sector. Several interventions have since been put in place to address these challenges spearhead by the NEPAD Agency.
With a view to the upcoming Climate Change Conference (COP 21) in Paris, Dr Mayaki emphasised the need for a Common African Position on Energy during all negotiations.
AUC Commissioner for Infrastructure and Energy, Dr Elham Ibrahim noted that PIDA was a perfect reflection for harmonised coordination in the implementation of regional infrastructure projects.
Ms Moono Mupotola, AfDB Director of Office of NEPAD Regional Integration (ONRI) reiterated the Banks continued support and commitment to the success of PIDA. “As the premier development finance institution in Africa, we intend to focus on the more transformative projects contained in the PIDA PAP, projects that are likely to have a larger development impact for Africa.” Particular emphasis would be placed on the energy sector, she said.
She underscored the funding gap in project preparation which stood currently at USD 2.5 billion up to 2020 which would require other players to join the bank. “Collaboration and mobilising additional resources for project preparation through innovative financing mechanisms should be a priority for the continent within,” she said.
On private sector mobilisation, Ms Mupotola highlighted the PIDA Partnership with the World Economic Forum to accelerate projects along the Central African Corridor in east Africa through identification of key projects, financial modelling and presentation to potential investors at a high-level roundtable hosted by African Heads of State from the five EAC countries. “As PIDA stakeholders we should strive to support more of such partnerships to accelerate implementation of PIDA” she underscored.
The week-long activities also saw a field visit to the Abidjan-Lagos Corridor. The Coastal Corridor is the most travelled West African corridor affecting more than 13 million people. Its modernisation and the addition of One-Stop-Border Posts will not only boost regional trade and integration but also reduce border crossing time, harassment and cost.
The Corridor is 1,000km long and involves the construction or rehabilitation of six-lane roads along the five countries Nigeria, Ghana, Cote d’ivoire, Benin and Togo. In 2015, the movement of 47 million people were registered.
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tralac’s Daily News selection: 16 November 2015
The selection: Monday, 16 November
Namibia: Geingob asked to intervene in livestock export battle (New Era)
Stakeholders in Namibia’s N$2bn per annum livestock export industry have officially requested President Hage Geingob to intervene after the local livestock industry received devastating news last week that South African authorities intend to push through with animal health requirements for Namibian livestock, which could bring the local industry to its knees. Namibia currently exports some 180 000 weaners, 90 000 sheep and 250 000 goats per year to South Africa and the N$2 billion industry is the livelihood of especially small-scale and communal farmers. Chairperson of the Livestock Producers Organisation Mecki Schneider yesterday described the requirements as “trade restrictions requested by the SA Red Meat Producers Organisation, because they have no system in place to control the flow of animals to and from South Africa”.
ANC is justified in rejecting AGOA debate in Parliament (Business Day)
SA’s economic interests are important to the ANC, but so is the quality of the nutrition that lands on our shores. There must be a careful balance between the two. [The author, Stone Sizane, is ANC chief whip]
Egyptian non-oil exports rise 0.5% in October (Ahram)
The improvement in this month's exports is also due to increased credit facilities for exporters by the central bank, read the statement. Exports remain 17.7% lower in the period from January to October at $15.318bn compared to the same period a year earlier when they registered $18.611bn. The falling trend in manufacturing exports was caused by both energy and FX shortages, Hany Farahat, senior economist at Cairo-based CI Capital, told Ahram Online in a telephone interview in October. Egypt, which has gone from being a net-exporter to a net-importer of natural gas in recent years, has been diverting most of the fuel to power plants, leaving many factories unable to operate at full capacity.
Starting today in Nairobi: Convergence of AUC/AFDB/UNECA and RECs monitoring and evaluation systems for the First Ten Year Implementation Plan of Agenda 2063
Starting today in Abidjan: 2015 ICA Annual Meeting
Infrastructure financing trends in Africa 2014
The 2014 commitments of $74bn is $25bn less than the $99.6bn reported in 2013. A sharp decline (of over $10bn) in Chinese commitments and the inclusion in 2013 of an exceptional £7bn commitment from the US towards the Power Africa initiative account for this decline. African governments’ budget allocations to infrastructure of $34.5bn account for the largest share of reported commitments. ICA members reported commitments totalling $18.8bn in 2014 - less than the $25.3bn committed in 2013 but, excluding the exceptional US contribution of $7bn in 2013, the figure is on a par with the volumes committed since 2012. The remaining commitments were made by non-ICA member external public sector funders and the private sector.
ICA background paper: Implementing renewable energy initiatives in Africa
The challenge facing African nations in this task is not likely to be about attracting the capital for meeting these targets, or finding the technologies or skills to implement them. Rather, the challenge is likely to lie in creating an enabling environment to absorb this capital evenly across Africa, and in addressing the challenges facing the continent. In policy terms, the challenge is to set the continent on a path of rapid economic growth fuelled by a low-cost, low-carbon and sustainable energy base, i.e. to focus on ‘economic adaptation’ (i.e., maintaining a high level of GDP/kWh, and at the same time increasing ‘clean’ kWh/capita).
Concluding tomorrow: PIDA Week 2015
Projects suffering funding: AU (NewsDay)
Many projects under the Programme for Infrastructure Development in Africa, are not moving at the expected rate due to funding problems, the African Union has said. Speaking at a Press conference in Abidjan, Ivory Coast, African Union Commissioner for Infrastructure Development, Elham Ibrahim, said African countries should have national and regional infrastructure projects harmonised. “There are so many projects going on, but they are not at the rate or speed we would want them to be. We want to accelerate [project implementation]. If there is something delaying that implementation or if there are some challenges, we can intervene so as to accelerate the projects,” Ibrahim said.
Infrastructure, a catalyst for Africa’s development
CBK Governor urges Africa to avoid external financing sources (Coastweek)
Kenya has called on African countries to counter global shocks by using strong African multilateral development finance institutions like the African Export-Import Bank. The Central Bank of Kenya Governor Patrick Njoroge said the continent’s over-dependence on external financing sources made it vulnerable to such shocks. "Because Afreximbank was a home-grown institution, it understood the unique requirements and needs of African businesses," Njoroge said late Friday in a speech read on his behalf by Anne Muoki, Assistant Director in the Bank, during the final session of the 15th Afreximbank Structured Trade Finance Seminar in Nairobi. The remarks came as the IMF had cautioned African countries against rushing to issue eurobonds, saying they may face exchange rate risks and problems repaying debts.
Lesotho's controversial health sector public–private partnership project (The Lancet)
S&P affirms Development Bank of Southern Africa's ratings (CPI)
Government yet to recapitalise Uganda Development Bank - chairman (Daily Monitor)
Intra-African trade and Africa Regional Integration Index: progress report on intra-African trade (AU)
The index covers the following dimensions: tariff liberalization, trade facilitation, free movement of persons and labour markets, financial integration, macroeconomic policy convergence, social and cultural integration (including gender issues), regional economic community institutional capacity, regional value chains, statistical harmonization, and regional infrastructure (including communications, transport and energy). The present paper will give a highlight of some of the emerging findings from the data collected to date, organized according to its various dimensions.
Figure 5: Intra-African exports as a share of GDP, less re-exports, Figure 6: Intra-African imports as a share of GDP, less re-exports: Where re-exports are included, in 2013, Lesotho had the highest total intra-African trade to GDP ratio (91%), then Swaziland (81%), Namibia (57%), Zimbabwe (46%), Botswana (43%) and Zambia (41%).
Note: the above document is a submission to the December meeting of the Committee on Regional Cooperation and Integration, on the theme 'Enhancing productive integration for Africa’s structural transformation'
East Africa: 2015 Logistics Performance Survey (Shippers Council)
The 2015 LPS which has covered the maritime and airfreight sub sectors provides interesting performance based indicators. The study has also undertaken a perception analysis on railway and the services of government agencies. In addition, the 2015 survey draws a lot from the Port Charter that was signed by key agencies involved in trade facilitation in the presence of H.E. President Uhuru Kenyatta, on 30th May 2014. Based on the CTC indicators, the 2015 LPS indicates a general improvement in the overall logistics performance compared to 2014 save for Tanzania and Burundi that indicate a slip in the average scores of 2.77 and 2.25 respectively against 2.89 and 2.78 respectively in 2014. Rwanda has maintained first position with an average score of 3.66, followed by Uganda and Kenya with an average score of 3.09 and 3.07 respectively. The Survey conclusively shows a general decline in transport costs on the Northern Corridor while the Central Corridor registers a steady but marginal increase.
Northern Corridor transport rates drop (Business Daily)
KPA to expand cargo handling capacity ahead of import boom (The Standard)
Mozambique: Extralegal barriers to the employment of foreigners (SPEED)
The reports aim to identify the extralegal barriers to the employment of foreigners, in which extralegal barriers are understood to include all aspects, procedures or requirements not established by law and which are being applied and are creating obstacles to the private sector, as well as all aspects, procedures or requirements that should be applied because they are established by law and are not applied, to the detriment of the private sector. The reports also aim to provide recommendations for the elimination of these barriers, thus creating a more business-friendly environment in Mozambique, in order to ensure strong and sustainable economic growth.
Rwanda: Govt expresses concerns over latest report by WB (New Times)
Gatare said their disagreements with the influential report were not a concern specific to Rwanda, but all developing economies. “When you put a measure associated with the income of a country, already the outcome will be predetermined. It is those types of measurements that we expressed disagreement with,” he said. Regarding the unpredictability of the changes made, Gatare said for the report to be relevant to countries subscribing to it, it is important to ensure that stakeholders were aware of such developments.
BRICS: Informal meeting of BRICS Leaders on the margins of the G20 Summit
The Leaders instructed relevant agencies of BRICS countries to engage actively in the implementation of the Strategy for the BRICS Economic Partnership adopted at the Ufa Summit as well as in preparing a draft BRICS Roadmap for Trade, Economic and Investment Cooperation until 2020. The Leaders noted that geopolitical challenges, including the politicization of economic relations and the introduction of unilateral economic sanctions, continue to beset future prospects for economic growth. They urged the need to ensure that trade and economic blocs are consistent with WTO norms and principles and contribute to strengthening the multilateral trading system. They decided to strive to facilitate market inter-linkages and an inclusive, rules-based and open world economy.
BRICS Competition Authorities: Durban conference statement
The 18th Global Trade Alert Report (authors: Simon Evenett/Johannes Fritz, CEPR)
What is the future of the WTO? (authors: Peter Draper/ , Tutwa)
African states to back India’s push to remain ‘pharmacy of developing world’ (The East African)
G20 leaders pledge robust fight against patchy economy - draft communique (Reuters)
G20 leaders agree to cooperate on migration as a global problem (Today's Zaman)
B20 Turkey Antalya Summit statement
IMF review of SDR basket of currencies: statement by Christine Lagarde
"I support the staff’s findings. The decision, of course, on whether the RMB should be included in the SDR basket rests with the IMF’s Executive Board. I will chair a meeting of the Board to consider the issue on November 30."
IMF investment head quits to launch Africa-focused fund (The Telegraph)
Nigeria import bars spook manufacturers (Business Day)
Standard & Poor's bullish on Botswana's economic recovery (Mmegi)
EAC ‘too weak’ to intervene in Burundi, says law body (The Citizen)
SADC Administrative Tribunal hunts for judges (The Herald)
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The tide turns? Falling world trade and the G20
The value of world trade is falling. The 18th Global Trade Alert report shows that the manufactures that account for a large share of the fall are those where G20 nations have imposed the most trade restrictions since 2014. G20 leaders should request that the Chinese G20 Presidency support initiatives to revive global trade and avoid more trade distortions.
The G20’s principal task of reviving global economic growth has never been easy – it is harder now that world trade is contracting. That’s right. World trade growth isn’t slowing down – the subject of a growing academic literature; the latest available monthly data suggests that world trade has been contracting during 2015 in both volume and value terms. On average G20 exports have fallen 4.5% since world trade peaked in value in October 2014.
The 18th report of the Global Trade Alert, published in advance of the G20 Leaders Summit in Antalya, Turkey uses the latest available data on trade flows and on protectionism to:
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Highlight the extent of falling world trade;
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Critically evaluate leading explanations for recent global trade dynamics;
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Demonstrate the marked increase in resort to protectionism in 2015; and
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Identify plausible policy initiatives that the G20 should pursue during the coming Chinese Presidency.
From slowing trade growth to falling world trade
The report pours cold water on the benign interpretation that the global trade slowdown is merely a combination of the rising US dollar, falling commodity prices, and retrenchment of supply chains involving China.
To provide the most up-to-date perspective data from the CPB’s World Trade Monitor and the UN Monthly COMTRADE database were employed. With respect to the latter, the largest possible sample was created of countries consistently reporting imports on a monthly basis from 226 nations was assembled from January 2010 to July 2015, the last month before available data become very patchy.
Figure 1. World export volumes are now falling – not growing more slowly
Source: CPB (2015).
The benign view of global trade dynamics places too much weight on data on the volume of global exports and does not take account of the following facts:
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Manufactured exports have been falling in price since mid-2011 (Figure 1);
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Even world export volumes are down 2% since their peak at the end of 2014 (Figure 1);
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After recovering in 2010 and during the first half of 2011, world trade stopped growing in total value, plateaued, and then began falling in nominal terms after October 2014 (see Figure 2);
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The recent fall in the total value of global trade is concentrated in a small number of product categories – 28 product categories together account for just under fourth-fifths of the contraction in global trade seen since October 2014;
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Shipments of motor vehicles have grown in value by 10% since October 2014 which, apart from gold, is the only major trade flow to continue growing;
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Of the 28 product categories accounting for at least 0.5% of the recent fall in global trade, eight were commodities and together were responsible for 54.2% of the overall trade fall. Three oil-related products had a major impact. Seven product categories involved some parts and components trade and together accounted for another 7.4%. The other goods – manufactured final goods – made up 17.2% of the recent contraction in world trade;
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The manufactured products which account for a larger share of the recent fall in global exports happen to be the very products where the G20 has imposed proportionally more trade restrictions since the beginning of 2014. In contrast, relatively fewer trade restrictions were imposed on motor vehicles over the same period (see Figure 3).
Figure 2. The total nominal value of world exports has stagnated since mid-2011 and has fallen sharply since October 2014
Figure 3. The G20 imposed proportionally more trade restrictions in product categories that accounted for a greater share of the recent global trade fall
From this evidence, what can we learn about the recent fall in global trade?
First, the importance of the oil price collapse of the recent years cannot be denied. Still, that explanation only goes so far – there is more to the story than OPEC.
Second, that the falls in observed trade are so unevenly spread across product categories surely casts some doubt on claims that the slowdown in global economic growth can account for the rest of the trade fall. Rather than across-the-board demand changes, perhaps demand for certain products has shifted a lot since October 2014. In which case, what could cause such expenditure switching?
Third, that so few of the heavily affected product categories involve parts and components casts doubt on the importance of supply chain reconfiguration in accounting for the recent fall in global trade. This is not to imply that changing supply chains were irrelevant in earlier periods (as many analysts contend).
Moreover, that motor vehicles trade expanded a lot whereas automobile parts trade contracted may not be easy to square with the bullwhip effect (unless some confounding factor can help account for the falling parts trade).
Overall, then, while much of the recent fall in global trade can be attributed to commodity price changes and their consequences, other explanations seem wanting. That the incidence of recent trade restrictions falls heaviest on the very manufactured products which have contributed the most to the fall in world trade is a major source of concern.
Resort to trade distortions in 2015 at record highs
The ‘level playing field’ has taken a battering this year. In preparing this report the GTA team found:
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Worldwide governments imposed 538 trade distortions in the first 10 months of this year – of which the G20 was responsible for 433;
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Easily spotted G20 tariff increases were down 21%, easier-to-hide G20 subsidies up 47%;
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Resort to trade distortions by the G20 is up 40% on the same period last year;
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Resort to trade distortions worldwide this year are two-and-a-half times higher than at the same point in 2009 – when G20 Leaders took the threats to global commerce seriously;
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Since the crisis erupted G20 governments have imposed 3,581 measures that have harmed foreign commercial interests;
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81% of all G20-imposed trade distortions remain in force – undercutting claims that crisis-era protectionism is a temporary expedient.
These aggregate developments are borne out on the ground with growing trade tensions in airlines and steel and over data storage rules, to choose just three examples. The time has come for the G20 to stop taking for granted the openness of the world trading system and to boost trade’s contribution to economic growth.
What should the G20 do?
Realistically, in the near term neither developments at the WTO nor the signing of the Trans-Pacific Partnership will counter falling world trade. While the Agreement on Trade Facilitation is welcome, as of now less than a third of WTO members have ratified it. Remarkably, ten G20 members (Argentina, Brazil, Canada, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, and Turkey) have yet to ratify this accord.
With the multilateral and regional options offering little near-term relief, attention turns to steps the G20 can take themselves. G20 leaders should request that the incoming Chinese Presidency build support for initiatives to revive global trade without imposing more trade distortions. To that end, the G20 leaders should:
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Instruct G20 trade ministers to commission and publish third-party (i) updates on world trade levels on a quarterly basis, (ii) analyses of sectors where trade has shrunk the most or where substantial excess capacity is said to exist, and (iii) estimates of the impact of suspending all nuisance tariffs (3% or less) on goods imported by the G20;
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Commit that temporary tariff cuts by G20 members on parts, components and capital goods will last at least two years – reducing uncertainty faced by exporters;
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Instruct the IMF to estimate the cost of G20 fiscal incentives given by all levels of government and state-linked companies and banks to stimulate trade and inflows of foreign investment. This is where much beggar-thy-neighbour activity is;
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Instruct the WTO, OECD, and UNCTAD to propose an updated version of the protectionist pledge that recognises the full range of crisis-era distortions to 21st century commerce.
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Intra-African trade and Africa Regional Integration Index: Progress report on intra-African trade
A regional integration agenda has been part of Africa’s strategy for economic transformation for more than three decades, and in some cases for almost a century.
African leaders now recognize more than ever the urgency of accelerating Africa’s integration, especially given the challenges of regionalism amid globalization. This urgency is reflected in the varying development agendas that African countries have adopted thus far: the New Partnership for Africa’s Development (NEPAD), the overarching development framework for the region in 2001; the 2012 adoption of a Framework, Roadmap and Architecture for fast tracking the establishment of the Continental Free Trade Area (AfCFTA) and an Action Plan for Boosting intra-African trade (BIAT); and Agenda 2063.
The benefits of regional integration are gains from new trade opportunities, larger markets, and increased competition. All formal regional integration arrangements reduce barriers (such as tariffs) to trade among member countries.
Economic theory predicts that free trade will improve welfare by enabling citizens to procure goods and services from the cheapest source, leading to the reallocation of resources based on comparative advantage. Regional integration improves policy stance in many areas of development. Pooling of economies and markets through regional integration provides a sufficiently wide economic and market space for economies of scale.
Eventually, all these efforts are expected to converge to an African Economic Community, whereby fiscal, social and sectoral policies will be continentally uniform. Through such an economic marketplace, Africa can strengthen its economic independence and empowerment with respect to the rest of the world.
A major aim of these efforts is to increase intra-African trade by breaking down trade barriers and enhancing mutually advantageous commercial relations through trade liberalization. Trade allows countries to specialize, increase employment and raise incomes.
Trade is also widely accepted to be a key engine for the promotion of economic growth and development in today’s globalized economy. The countries and regions of the world that have been able to achieve sustained improvement in the living conditions of their peoples, are those with good trade performance and that have become well integrated into the global trading system.
Intra-African trade as a share of total trade and Africa’s GDP
Intra-African trade, as percentage of gross domestic product (GDP) as of 2013, stands at around 9 percent – a figure that is low as compared to other regions of the world. Trade in Africa is currently at around 14 percent of Africa’s total trade, implying that 86 percent is trade with the rest of world. It can also be observed that the average level of intra-African trade, though fluctuating, has consistently remained around 15 percent of Africa’s total trade over the past decade.
The share of intra-African trade in Africa’s total trade compares unfavourably with other regions of the world, at 14 percent of total exports. Only Western Asia has a lower share of intraregional trade as a percentage of total exports (9 percent). In comparison, the shares of intraregional trade in South and Central America, North America, European Union and Asia stand at 17 percent, 49 percent, 61 percent and 62 percent respectively.
Africa’s regional economic communities also have a low share of intragroup trade relative to other regional groupings. The 14 top-performing regional groupings worldwide have an average share of 42 percent of intra-group trade in their total trade with the rest of the world, while Africa’s regional economic communities’ average is 10 percent. Africa continues to have some of the highest trading costs of any region in the world, surpassed only by Eastern Europe and Central Asia (where the percentage of landlocked countries is higher). Furthermore, trade barriers among African countries are often higher than those between the African countries and the rest of the world.
Africa Regional Integration Index
The African Union Commission, the Economic Commission for Africa, and the African Development Bank are working together to produce the Africa Regional Integration Index. At present, the project is in the data collection phase, with substantial data (almost all countries for 28 indicators) already collected. The methodology for the index was developed in consultation with African Member States (direct consultations were held with 18 Member States), regional economic communities and leading experts on measuring regional integration from inside and outside the continent.
The methodology for the index was also presented to the eighth Joint Annual Meetings of the African Union Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration and the Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development, the seventh Conference of African Ministers in charge of Integration, and the first Joint Session of the Committee of Directors Generals of National Statistics Office and the Statistical Commission for Africa, all of which passed resolutions supporting the methodology presented.
The index covers the following dimensions: tariff liberalization, trade facilitation, free movement of persons and labour markets, financial integration, macroeconomic policy convergence, social and cultural integration (including gender issues), regional economic community institutional capacity, regional value chains, statistical harmonization, and regional infrastructure (including communications, transport and energy).
The present paper will give a highlight of some of the emerging findings from the data collected to date, organized according to its various dimensions.
Trade integration
Data on trade, excluding re-exports as a share of GDP, was available for 31 countries. Where re-exports are included, in 2013, Lesotho had the highest total intra-African trade to GDP ratio (91 percent), then Swaziland (81 percent), Namibia (57 percent), Zimbabwe (46 percent), Botswana (43 percent) and Zambia (41 percent).
Looking at the tariffs applied on intraregional economic community imports, in 2014 EAC had no tariffs on intra-EAC trade; the Intergovernmental Authority on Development (IGAD) had an average applied tariff for intraregional economic community trade of 1.8 percent. The equivalent figures for the others were as follows: ECCAS and COMESA – both 1.9 percent; the Arab Maghreb Union (AMU) – 2.6 percent; SADC – 3.8 percent; ECOWAS – 5.6 percent; and the Community of Sahel-Saharan States (CEN-SAD) – 7.4 percent.
Looking at the individual countries with the lowest average applied tariffs on intraregional economic community trade, Mauritius places zero tariffs on all imports from either SADC or COMESA. No other member of SADC places zero tariffs on all SADC imports; Libya is the only other COMESA member to place zero tariffs on all imports from COMESA. Libya places zero tariffs on all imports from AMU (although this statistic dates from 2006, and more recent information is not available from public databases).
In terms of trade facilitation, the countries with the fewest document submissions required to be allowed to import goods are Djibouti, Mauritius and Seychelles (five documents each). Mauritius, Morocco and Tunisia require the fewest documents for exports (four documents each).
For the World Bank’s indicator on the ease of trading across borders, in their most recent edition of “Doing Business”, the highest-scoring countries were Mauritius and Morocco. The landlocked country with the highest score was Swaziland. The countries making the greatest absolute improvement in their scores for this indicator over the most recent period were Côte d’Ivoire, the Sudan and Burundi.
This report is a submission to the December meeting of the Committee on Regional Cooperation and Integration, on the theme “Enhancing Productive Integration for Africa’s Structural Transformation”.
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Infrastructure Financing Trends in Africa 2014
Infrastructure Financing Trends in Africa 2014 shows that over $74bn was committed in 2014 to the development of Africa’s infrastructure, and that disbursements by ICA members reached a record level of $13bn.
The 2014 commitments of $74bn is $25bn less than the $99.6bn reported in 2013. A sharp decline (of over $10bn) in Chinese commitments and the inclusion in 2013 of an exceptional £7bn commitment from the US towards the Power Africa initiative account for this decline.
African governments’ budget allocations to infrastructure of $34.5bn account for the largest share of reported commitments. ICA members* reported commitments totalling $18.8bn in 2014 – less than the $25.3bn committed in 2013 but, excluding the exceptional US contribution of $7bn in 2013, the figure is on a par with the volumes committed since 2012. The remaining commitments were made by non-ICA member external public sector funders and the private sector.
Key messages and findings from the report include:
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Key trends observable from ICA members’ data for 2014 include a shift towards multi-sector projects, growing attention to Central Africa, the energy sector’s continued dominance in attracting commitments and a very sharp decline in commitments to regional projects, including PIDA/PAP.
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Identified central government budget allocations provided 2014’s largest category of commitments to infrastructure development, totalling $34.5bn. Data was obtained from 42 countries (up from 20 in the 2013 report) yet the total value of commitments is lower in 2014 compared with the $46.7bn reported for 2013. This was due to a more rigorous analysis of budget spending and external funding. However, the potential for double counting remains.
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Central government budget allocations for infrastructure grew between 2012 and 2014, according to analysis that uses a more rigorous methodology applied to the 2012 and 2013 budgets of a control group of 20 countries (who generally report data in a consistent manner). In 2014, this group’s allocations totalled $24.6bn, compared with $27.1bn in 2013 and $23.3bn in 2012.
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Substantial commitments may also be made to infrastructure at a subnational level – by local governments, utility companies and other institutions. This recognises that national government allocations do not reflect a country’s total public sector spending.
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Africa’s regional development banks committed nearly $1.6bn to infrastructure projects in 2014. This is a decrease on their $2.2bn commitments across the continent in 2013.
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$16.5bn (88%) of the total $18.8bn ICA member commitments were directed to hard infrastructure in 2014.
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$2.3bn (12%) of ICA member commitments went to soft infrastructure. Two-thirds ($1.4bn) of soft commitments went to capacity building, some 16% was directed at project preparation and around 5% at research and evaluation. Another 16% of commitments were aimed at other soft infrastructure projects and programmes.
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ICA members used conventional financing instruments the most. Loans accounted for $14.3bn (75%) and grants for $2.7bn (14%) of financings in 2014.This marks a distinct shift in the emphasis of members that consistently report data to ICA. In 2013 they reported that loans and grants provided $10.8bn (37%) and $7.4bn (25%) of funding respectively.
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Transport operations attracted the most financial commitments of any sector in 2014, taking all sources of finance into account. This was largely due to $17.6bn in national government budget allocations and the $8.4bn of investment certificates for Egypt’s Suez Canal expansion.
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Chinese funding for transport infrastructure fell away significantly in 2014, having catalysed some very substantial road and rail projects in recent years.
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Commitments from non-ICA member countries included Brazil ($503.4m), India ($423.9m) and South Korea ($206m). Non-member European bilaterals committed $876.8m, a substantial increase compared with $189m in 2013.
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The private sector concentrated its investments mainly on energy in 2014, having showed substantial interest in port expansions in 2013.
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There was a decline in the number of projects with private sector participation reaching financial close, as recorded in the Private Participation in Infrastructure (PPI) Project Database. This was down from $8.8bn in 2013 to $5.1bn in 2014. Of this, $2.9bn was financed by the private sector with the remainder from DFIs.
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Energy once more dominated ICA members’ commitments with a 49% share (54% in 2013). It was followed by transport at 19% (22% in 2013) and water & sanitation at 18% (17%). ICT received just 2.7% of total commitments.
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The trend towards ICA members backing multi-sector projects is gaining momentum. In 2013 they attracted twice the share reported in 2012, registering 5% of all commitments, and in 2014 this rose to more than 11% of the total.
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North Africa has overtaken West Africa as the region that received the highest commitments from ICA members in 2014, with 27% of the total ($5bn).
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ICA members’ commitments to Central Africa reached their highest point in 2014 for five years, with commitments of $3.7bn. This made the region the second highest recipient of 2014 commitments after North Africa.
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More than 50% of private sector investors said they would invest more in the sectors where they already participate, while 88% of energy investors said they intend to increase their commitments, according to the 69 respondents to ICA’s African Infrastructure Investment Survey 2014. Respondents said Kenya and South Africa provided the most favourable investment locations followed by Nigeria.
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Constraints such as bureaucratic delays, policy uncertainty, lack of transparency and insufficient institutional capacity remain a challenge, private sector respondents and ICA members agreed.
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The shortage of adequately prepared or bankable projects was a much bigger challenge than finding project finance, members and operators agreed – although this registered as much less of an issue for private capital than in previous years.
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Private sector investments focused on just a few large-scale projects in 2014, while participation in regional projects appears too challenging for most private sector investors and developers.
The report also found that, according to both ICA members and the private sector, constraints such as policy uncertainty, bureaucratic delays and a lack of transparency remain a challenge to increased investment in infrastructure, while a shortage of adequately prepared or bankable projects was a bigger obstacle than finding project finance, according to both ICA members and operators.
The report was discussed at the ICA 2015 Annual Meeting, which took place in Abidjan, Cote d’Ivoire, on 16 & 17 November 2015.
» Download: Infrastructure Financing Trends in Africa 2014 (PDF, 8.88 MB)
* ICA members are: G8 countries, South Africa, the African Development Bank, the Development Bank of Southern Africa, the European Commission, the European Investment Bank and the World Bank Group.
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BRICS call on G20 to work harder on economic policy cooperation
The BRICS group of emerging nations called on the Group of 20 (G20) top developed and developing nations on Sunday to strengthen their macroeconomic policy cooperation to prevent bad effects from a weak global economy and reduce risks to growth.
Leaders of Brazil, Russia, India, China and South Africa, who met on the sidelines of the G20 summit in the Turkish town of Antalya, said global economic recovery was not yet sustainable.
“(This) underlines the importance of strengthening macroeconomic policy coordination and cooperation among G20 members to avoid negative spillovers and to achieve strong, sustainable and balanced growth,” the group said in a statement after the meeting.
The group’s economies have been struggling this year, with China’s growth at its weakest since the 2008-2009 global financial crisis and recovering from extreme market volatility over the summer.
Russia’s economy, hit by sanctions imposed over Moscow’s role in the Ukraine crisis as well as declining commodity prices, has entered into recession for the first time since 2009.
Many investors have pulled out of the once-vaunted BRIC quartet of emerging markets, then without South Africa, due to years of collective underperformance by the group.
“Complex structural and cyclical problems have led to a slowdown in the world economy and in ours,” Russian President Vladimir Putin told the BRICS meeting.
The group, which has struggled to build an economic and political partnership, condemned on Sunday the terrorist attacks in Paris, vowing to strengthen cooperation among one another and with other nations in the fight against terrorism.
But the group came short of addressing another critical issue discussed at the G20 summit over the weekend in Turkey – the refugee crisis.
South African President Jacob Zuma said only when addressing the group and commenting on the attacks in Paris on Friday, that “the attacks don’t mean that every refugee is a terrorist”.
The diverse BRICS, which have been meeting regularly since 2009 and account for a fifth of the world’s economic output and 40 percent of its population, have struggled to come up with unified actions, often instead focusing on criticising the West.
For Russia, hit by sanctions that have cut off access to Western funding, thwarted investment and contributed to an economic downturn, greater cooperation is a priority.
On Sunday, the group criticised the sanctions.
“The leaders noted that geopolitical challenges, including the politicisation of economic relations and the introduction of unilateral economic sanctions, continue to beset future prospects for economic growth,” it said.
But they pledged to work together with other G20 members to reduce potential risks to economic growth.
Media Note on the Informal Meeting of the BRICS Leaders on the Margins of the G20 Summit in Antalya
The BRICS Leaders met on the margins of the G20 Summit in Antalya on 15 November 2015.
The Leaders strongly condemned the abhorrent terror attacks in Paris. They expressed their condolences to the families of the victims and extended their wishes for the speedy recovery to those injured. They reaffirmed their support for the people and government of France and the efforts to bring the perpetrators to justice. The Leaders recommitted to strengthen cooperation among BRICS countries and with other nations in the fight against terrorism.
The Leaders commended Russia for the hosting of a successful Seventh BRICS Summit, contributing further to the enhanced intra-BRICS cooperation and appreciated the good pace of the implementation of the Ufa Action Plan.
The Leaders underlined the importance of strengthening BRICS strategic partnership guided by the principles of openness, solidarity, equality, mutual understanding, inclusiveness and mutually beneficial cooperation.
The Leaders welcomed the substantive progress made this year in advancing intra-BRICS cooperation. The New Development Bank (NDB) is starting its operating activities and is expected to launch its inaugural projects in the beginning of 2016. The NDB will enhance cooperation with existing and new financing institutions including Asian Infrastructure Investment Bank. Furthermore, the BRICS Contingent Reserve Arrangement (CRA) has been established and will contribute to the stability of the international financial system in view of the increased volatility of the world financial and economic situation.
The Leaders instructed relevant agencies of BRICS countries to engage actively in the implementation of the Strategy for the BRICS Economic Partnership adopted at the Ufa Summit as well as in preparing a draft BRICS Roadmap for Trade, Economic and Investment Cooperation until 2020.
The Leaders exchanged views on the main topics on the G20 Summit agenda and agreed to pursue issues of mutual interest to the BRICS countries.
The Leaders agreed that the global economy was still at risk and its recovery was not yet sustainable, which underlines the importance of strengthening macroeconomic policy coordination and cooperation among G20 members to avoid negative spillovers and to achieve strong, sustainable and balanced growth. The Leaders agreed that based on the progress already made, all G20 members need to focus on the implementation of their respective national growth strategies. They stressed their determination to continue to work together with other G20 members to make continuous contributions to a more rapid, sustainable recovery of the global economy and towards the reduction of potential risks.
The Leaders noted that geopolitical challenges, including the politicization of economic relations and the introduction of unilateral economic sanctions, continue to beset future prospects for economic growth. They urged the need to ensure that trade and economic blocs are consistent with WTO norms and principles and contribute to strengthening the multilateral trading system. They decided to strive to facilitate market inter-linkages and an inclusive, rules-based and open world economy.
The Leaders agreed to continue the exchange and the coordination of positions among the BRICS countries on the G20 agenda to better accommodate interests of emerging market economies and developing countries. In this context, they welcomed the first meeting of the BRICS Working Group on Anti-Corruption on 1 November 2015, which would also contribute to the work of relevant multilateral fora, including the G20 Anti-Corruption Working Group (ACWG).
The Leaders expressed their deep disappointment at the lack of progress in modernizing international financial institutions, especially on the agreements on the reform of the International Monetary Fund (IMF). They urged the IMF – in cooperation with its membership – to step up efforts in collaboration with the G20 to find such solutions that would ultimately make it possible to increase the institution’s quota resources and review the distribution of quotas and votes in favour of developing countries and emerging market economies. The adoption of the 2010 IMF reforms remains the highest priority for safeguarding the credibility, legitimacy and effectiveness of the IMF and the Leaders urge the United States to ratify these reforms as soon as possible.
The Leaders welcomed the adoption of the 2030 Agenda for Sustainable Development at the United Nations Summit held in September 2015 as well as the Addis Ababa Action Agenda and acknowledged the coordination and cooperation efforts made by the BRICS countries. They expressed their commitment to the implementation of the 2030 Agenda for Sustainable Development, including through strengthening cooperation among BRICS countries in this process, and decided to work towards the improvement of the international development cooperation architecture.
The Leaders look forward to a successful outcome at COP21 in Paris in December, and affirm their determination to adopt at the Paris Conference a protocol, another legal instrument or an agreed outcome with legal force under the UNFCCC that is applicable to all Parties. The Paris agreement should be fair, balanced, durable and comprehensive, reflecting the principles of equity and common but differentiated responsibilities and respective capabilities, in light of different national circumstances.
The Leaders declared their readiness to support China in its upcoming G20 Presidency with a view to enhancing the leading role of the forum in meeting global financial and economic challenges. They encourage G20 members to strengthen macroeconomic cooperation, catalyze innovation, boost trade and investment, lead by example on global development cooperation.