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Launch of Johannesburg centre of BRICS Bank soon: Zuma
The New Development Bank (NDB) launched by the BRICS have been “welcomed by all”, South African President Jacob Zuma has asserted. The new lender is expected to strengthen the group’s ability to offer developing nations the support traditionally given by the US and Japan through organizations like the World Bank.
Preparations for the opening of the regional branch of the $100 billion NDB in Johannesburg is at an advanced stage, Zuma told South African lawmakers on Thursday in Cape Town.
“The next exciting initiative is the establishment of the African regional centre of the bank in Johannesburg. South Africa is proud to host the regional centre and preparations are at an advanced stage,” said Zuma.
“It (BRICS Bank) deals with anyone who comes to seek support from the bank. It has been welcomed by all, firstly, the big world banks have received the BRICS Development Bank very well. They see it as an important additional factor in the global financial transactions,” he added.
The New Development Bank came into existence after three years of negotiations among members of BRICS.
At the launch of the new lender earlier last month in Shanghai, China’s Finance Minister Lou Jiwei said the BRICS Bank will be global development partner to the established institutions.
“NDB’s support for infrastructure construction will effectively ease the bottleneck that has constrained emerging and developing nations for long and will offer support for their economies’ upgrade and growth. NDB is a new member and partner to the global development system,” said Lou.
Intra-BRICS trade has increased by 70 per cent between BRICS member countries since 2009 and South Africa stands to benefit from the new BRICS Development Bank, Zuma said in response to a query in the National Assembly in Cape Town on Thursday.
“The summit also affirmed the importance of BRICS in the global arena. BRICS presents an aggregate Growth Domestic Product (GDP) exceeding US$32-trillion. This marks a 60% growth since the formation of the grouping. BRICS also accounts almost 30% of the global GDP and produces a third of the world’s industrial products and half of agricultural goods,” he said.
Brazil, Russia, China, India and South Africa attracted 20.5 per cent of the global total direct investment in 2014, compared to only 16.9 per cent in 2009.
The share of the BRICS capital investment on the global market has also increased significantly, Zuma said, from 9.7 per cent to 14 per cent since 2009.
Zuma also praised his Russian counterpart Vladimir Putin’s economic partnership blueprint for the BRICS unveiled at a summit of the five countries in Russia last month.
“BRICS leaders also adopted as one of the key summit outcomes, a strategy for the BRICS economic partnership, aimed at further boosting trade and investment ties,” said Zuma.
“The seventh BRICS Summit in Ufa, Russia, registered substantive progress. The key achievement was entry into force of the BRICS financial institutions namely the New Development Bank and the contingency reserve arrangements.”
Two leading South African bankers have been appointed to the board of the BRICS bank.
The BRICS New Development Bank will name its first investment in April next year and the first loan will be issued in yuan not dollar, top officials confirmed.
The first president of the Bank, Kundapur Vaman Kamath said in Shanghai last month that the new lender will work closely with the China-led Asian Infrastructure Investment Bank.
“We have partnerships that we will forge with the AIIB, the national loan banks and indeed, the exiting market loan banks,” he said.
The bank has an initial authorized capital of $100 billion.
Its initial subscribed capital of $50 billion will be equally shared among the founding members.
It will have a three-tier governance structure – a board of governors, a board of directors, a president and vice presidents.
As agreed by the five countries, the first chair of the board of governors has been nominated by Russia, the first chair of the board of directors by Brazil, and the first president by India.
The paid-in reserves are planned to be denominated in each country’s currency. The Chinese renmimbi is also expected to replace the dollar at the BRICS Bank, especially for projects in Asia.
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tralac’s Daily News selection: 7 August 2015
The selection: Friday, 7 August
On Monday: the Northern Corridor Transit Transport Coordination Authority Policy Organs will meet in Kinshasa.
This Rapid Evidence Assessment addresses two questions, to which it finds the literature offers partial answers (that can be supplemented by flanking analyses). What has been the impact of Free Trade Agreements between developed and developing countries on economic development in developing countries? What does this evidence tell us about how developing countries might best benefit from new FTAs (such as Economic Partnership Agreements), and how can they avoid harm? [The authors: Christopher Stevens, Muhammad Irfan, Isabella Massa, Jane Kennan] [Download]
How can social network analysis help tackle West Africa’s challenges? (SWAC-OECD)
Why is SNA relevant for West Africa and the Sahel? The challenges these countries share are of a regional, national and local nature, often transcending national boundaries. Actors interact both across countries and within regions in the same country, whether on issues of food security, physical security, trade or migration. These regional and national relationships are therefore ripe for SNA modelling. SNA’s graphical and spatial dimension can bring clarity to complex relationships and interactions between actors in West Africa. An example of social network analysis: this figure maps the business relations between traders located in Niger, Benin and Nigeria.
The Sahel and West Africa Club (SWAC) is an international platform for policy dialogue and analysis devoted to regional issues in West Africa. Its mission is to enhance the effectiveness of regional policies and partner support.
New Tribunal on SADC summit agenda: Chair (The Herald)
SADC will discuss the resuscitation of its tribunal court at the forthcoming 35th Heads of State and Government Summit to be convened in a week’s time in Botswana, the regional body’s chairman President Mugabe has said. Unlike its disbanded, donor-driven and controversial predecessor, President Mugabe said the reconstituted Tribunal would be reviewed to ensure that its objectives are agreeable to all member States. It is expected that the new Tribunal’s jurisdiction will be confined only to advisory interpretation of the SADC Treaty and any other protocols that may be negotiated among member States.
SADC poised to harmonise regional livestock legislation (AU-IBAR)
Member States of SADC agreed to harmonise veterinary legislations, which spur a collective actions on the prevention and control of trans-boundary animal diseases. In a regional seminar, held in Maseru, Lesotho, from 6th to 10th July 2015, Member States reached consensus to harmonise a veterinary legislation in animal disease control with a focus on PPR. The regional seminar was organized by AU-IBAR/VET-GOV Programme and OIE to create the platform where SADC Member States can convene and deliberate on regional livestock issues and challenges that require regional remedies. The seminary drew over 35 participants from 13 states.
The pesticide dilemma (New Vision)
As such, the Southern African Pesticide Regulators Forum (SAPReF) met in Harare from 27-30 July to come up with a strategic action plan that seeks to reduce health and environmental risks associated with the use, trade and disposal of pesticides. Speaking during the official opening of the strategic workshop, the Permanent Secretary in the host country's Ministry of Agriculture, Mechanisation and Irrigation Development, Ringson Chitsiko, said developing countries were facing growing domestic and global concerns over pesticide use and associated risks. Chitsiko added that central to environmental and health hazards created by the expanding use of pesticides in developing countries, is the weakness of national regulatory agencies.
Tanzania: Govt advised to ban banana imports from Mozambique (IPPMedia)
The government has been advised to ban transportation, importation and distribution of banana plants in the country from Mozambique. This follows the outbreak of a new killer disease known as Fusarium Wilt Race-4 in Mozambique which, once infests the plants, it sends to the entire banana farm to the graveyard. The advice was given by Assistant Director, Plant Health Service (PHS) in the Ministry of Agriculture, Food Security and Cooperatives, Cornelius Mkondo at the Nane Nane exhibitions here.
SADC partners USAID to promote safer food trade (Mmegi)
Speaking at the formal handover of the programme draft to the SADC Secretariat, the United States of America ambassador to Botswana, Earl Miller said he believes improving SPS strategies will lead to increased trade flows in Southern Africa. “This will promote economic growth while creating jobs and increasing the standard of living for people across our region, from the smallholder farmers who grow crops for the local market to the agribusiness producing food for export, as well as the truck drivers who ferry the goods to traders across borders and finally, the retailers who deliver the products to consumers,” he said.
South Africa and AGOA: Withdraw South Africa’s trade benefits, says NPPC (PORK Network)
In comments submitted Wednesday night, the National Pork Producers Council asked the Obama administration to withdraw or at least limit preferential trade benefits for South Africa because of that country’s reluctance to provide market access to US pork. “South Africa has shown that it is pleased to take advantage of U.S. preferential trade programs but is unwilling to extend even customary equitable treatment to imports of pork from the United States,” said NPPC in comments to the Office of the US Trade Representative.
Nigeria and AGOA: Nigerian-American chamber urges entrepreneurs to exploit AGOA initiative (BusinessDay)
“South Africa exported $3.6bn worth of goods to America in 2014 while Nigeria exported only $5.6m goods. If Nigeria will benefit from AGOA, then her trade should not be disastrous. We should exploit all the opportunities in AGOA,” Olabintan Famutimi, NACC President said.
Ethiopia: Improving public investment management (World Bank Blogs)
Ethiopia has the third-largest public investment rate in the world and three times the average for Sub Saharan Africa. This effort has contributed to growth that has averaged 10.9 percent since 2004—a figure higher than that of their neighbours or low-income countries on average. Infrastructure investment has also been helpful in expanding access to services and in gaining competitiveness, being a large landlocked country. Some of the credit goes to sound management of key investments, particularly roads, which received on average 18 percent of total public investment over the past decade. [The author: Mario Marcel]
How much investment is Mozambique losing? (SPEED)
SPEED’s experience in working with companies which have signed agreements under the New Alliance framework shows the same problems found by IESE. The New Alliance companies have all made firm commitments to invest and are keen to do so. However most have experienced significant delays or barriers to their investment. We need to take a long, hard look at those investments that have failed, or those that have never happened rather than focusing only on success stories. We must learn lessons from failures. If we do this we will quickly understand that radical reform of the business environment is needed. [The author: Carrie Davies]
Zimbabwe: Funds for major projects unveiled (The Herald)
Mega deals signed by President Mugabe during his State visit to China last year are set for take-off, with the Asian economic giant announcing yesterday that it will immediately bankroll a number of selected infrastructure projects. Identified projects, whose funding is ready, will be implemented this year, with special economic zones being constructed in Harare and Bulawayo, major roads being dualised, national railway links being rehabilitated and water projects being completed.
“We have projects in the infrastructure area to be done and this includes the road system from Beitbridge-Masvingo-Harare-Chirundu as well as rehabilitation of rail links spanning Bulawayo through Gweru and Harare up to Mutare and going as far as Mozambique. The phase will also see works being done on the railway line to Victoria Falls passing through Hwange from Harare where it will link with the Copper Belt and eventually Angola.” Dr Sibanda said the Gweru-Chiculacula railway line up to Maputo will be refurbished, while the Harare-Nyamapanda Highway would also be dualised.
Zambia-DRC seal trade deal (Zambia Daily Mail)
The agreement will address unfair trade practices, measures to curb smuggling and facilitation of exchange of information between border authorities in the two countries. Minister of Commerce, Trade and Industry Margaret Mwanakatwe said under the agreement, the two countries will establish common border infrastructure such as banks and trade centres. Speaking at the signing ceremony in Lusaka yesterday, Mrs Mwanakatwe said the bilateral trade agreement also provides for duty-free importation between the two countries.
Featured newsletters: TradeMark East Africa, CUTS Africa
Modi’s ‘port-led’ export drive leaves India’s hinterland stranded (LiveMint)
It is exporters like Gupta that Modi had in mind when he launched his ‘Make in India’ drive last September, laying out a model of “port-led” development that would support industrial growth and help create manufacturing jobs. Modi’s vision includes creating a tax union to slash costs and transport times, and a network of industrial corridors connecting the interior to ports. But political opposition to both the new tax and a law making it easier to buy land for development mean those may be years away. For now, the inefficiencies are exacerbating the pain of weak global demand and a 15% drop in exports between December and June from a year ago. Exporting a standard container requires seven documents, takes 17 days and costs $1,332 in India, according to the World Bank’s Doing Business 2015 report. India ranked 126th of 189 economies on the ease of trading across borders, well behind Mexico (44th) and China (98th). All of India’s ports together handle less trade than Shanghai alone.
India may lift ceiling on e-commerce exports (LiveMint)
Once reluctant to negotiate the issue at multilateral forums since its domestic e-commerce policy is not clear on the matter, India has started sending signals that it is ready to make e-commerce part of trade agreements. In the inter-session meeting of trade ministers belonging to the 16-member regional comprehensive economic partnership at Kuala Lumpur last month, India agreed to the formation of a working group on e-commerce, after initial strong resistance to the move by Japan. Similarly, reversing its stand against engagement in e-commerce at the BRICS grouping (comprising Brazil, Russia, India, China and South Africa), India agreed to the Framework for BRICS E-commerce Cooperation at a summit in Ufa, Russia, earlier this month.
Poverty reduction strategies in Fund engagement with Low-Income Countries (IMF)
The Executive Board of the IMF, on 22 June 2015, discussed and adopted the proposed reform set out in a Board paper on “Reform of the Fund’s Policy on Poverty Reduction Strategies in Fund Engagement with Low-Income Countries—Proposals.” Executive Board Assessment:
Nigeria’s oil industry in disarray as illicit trade booms (Naija247news)
Conjoining new Suez Canal with China’s Belt and Road initiatives benefits world (Xinhua)
Zuma: Trade between BRICS countries up 70% (SAnews)
Kenya: South Africa fund to invest Sh3.5bn in local property (Business Daily)
Niger, first LDC to ratify the Trade Facilitation Agreement (WTO)
Jordanian agencies push for lifting of ban on hiring Kenyans (Business Daily)
South Sudan's warring sides resume talks under sanctions threat (Reuters)
Kenya-Somalia: Senate team raises alarm over border region ‘invasion’ (Daily Nation)
Australia places trade at the centre of ties with Kenya (Business Daily)
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 6 August 2015
The selection: Wednesday, 5 August 2015
The selection: Tuesday, 4 August 2015
The selection: Monday, 3 August 2015
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
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Niger, first LDC to ratify the Trade Facilitation Agreement
Niger has become the twelve WTO member and the first LDC (Least developed country) to ratify the new Trade Facilitation Agreement (TFA). Niger’s ambassador, Ado Elhadji Abou, presented the instrument of acceptance of the TFA to the Director-General, Roberto Azevêdo on August 6th.
The TFA will enter into force once two-thirds of the WTO membership has formally accepted the Agreement. In addition to Niger, the following members have ratified the Agreement: Nicaragua, Trinidad and Tobago, the Republic of Korea, Hong Kong China, Singapore, the United States, Mauritius, Malaysia, Japan, Australia and Botswana.
Concluded at the WTO’s 2013 Bali Ministerial Conference, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.
The TFA broke new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, the requirement to implement the Agreement was directly linked to the capacity of the country to do so. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity.
A Trade Facilitation Agreement Facility (TFAF) was also created at the request of developing and least-developed country members to help ensure that they receive the assistance needed to reap the full benefits of the TFA and to support the ultimate goal of full implementation of the new agreement by all members.
More information on trade facilitation and the TFA can be found here.
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NPPC asks administration to withdraw South Africa’s trade benefits
In comments submitted on Wednesday night, the National Pork Producers Council asked the Obama administration to withdraw, or at least limit, preferential trade benefits for South Africa because of that country’s reluctance to provide market access to U.S. pork.
“South Africa has shown that it is pleased to take advantage of U.S. preferential trade programs but is unwilling to extend even customary equitable treatment to imports of pork from the United States,” the NPPC says in comments to the Office of the U.S. Trade Representative.
South Africa gets duty-free access to the U.S. market for dozens of its products under the African Growth and Opportunity Act and the Generalized System of Preferences. In 2014, it shipped $1.7 billion of goods to the United States under AGOA and $1.3 billion under the GSP program.
The NPPC noted that South Africa enforces “harsh and unjustifiable” import restrictions on U.S. pork to prevent diseases for which there is a negligible risk of transmission from U.S. pork products. The South African Ministry of Agriculture, for example, imposes time and temperature requirements on U.S. pork as mitigation for trichinae, which is nearly non-existent in the U.S. commercial hog herd.
The organization pointed out that the USDA has offered to certify that pork exported to South Africa would only come from farms participating in the U.S. pork industry’s Pork Quality Assurance Plus program, which includes biosecurity measures to prevent exposure of pigs to sources of trichinae. Although the certification has been accepted by a number of other countries, it has been rejected by South Africa.
South Africa is maintaining trade barriers, the NPPC says, despite overwhelming evidence that they are unsupported by international standards or any legitimate scientific or World Trade Organization-legal justification and is making no effort to lift them.
“We have undertaken efforts to accommodate South African demands even though we know and its officials know that they are unnecessary,” the NPPC says. “We have done this with enormous trepidation because of the risk that other countries will see the South African approach as a model for how to restrict imports without raising tariffs. But it is time to draw the line.
“We believe that South Africa’s eligibility for benefits under AGOA should be withdrawn,” the NPPC concludes.
Trade between BRICS countries up 70%
President Jacob Zuma says trade has increased by 70% between BRICS member countries over the past couple of years and that South Africa stands to benefit from the BRICS Development Bank.
The President said this when answering questions for written reply at the National Assembly in Cape Town on Thursday.
The President had been asked a question on progress that has been made amongst BRICS partners and other developing countries with regard to industrial cooperation and investment.
“The summit also affirmed the importance of BRICS in the global arena. BRICS presents an aggregate Growth Domestic Product (GDP) exceeding US$32 trillion. This marks a 60% growth since the formation of the grouping.
“BRICS also accounts almost 30% of the global GDP and produces a third of the world’s industrial products and half of agricultural goods,” he said.
The President also said that further to this progress, trade amongst the BRICS countries has grown by 70% since 2009.
Also, BRICS countries attracted 20.5% of the global total direct investment in 2014, compared to only 16.9% in 2009.
The share of the BRICS capital investment on the global market has also increased significantly, the President said, from 9.7% to 14% since 2009.
“BRICS leaders also adopted as one of the key summit outcomes, a strategy for the BRICS economic partnership, aimed at further boosting trade and investment ties,” he said.
The President said the Ufa declaration focusses on a number of areas, including global politics, world finance, economy and trade, cooperation in social and humanitarian spheres as well among parliaments, business and civil society.
He said, meanwhile, that the summit also produced exciting developments with relation to the BRICS Development Bank.
“The seventh BRICS Summit in Ufa, Russia, registered substantive progress. The key achievement was entry into force of the BRICS financial institutions namely the New Development Bank and the contingency reserve arrangements.
“Two leading South African bankers have been appointed to the board of the BRICS bank.
“The next exciting initiative is the establishment of the African regional centre of the bank in Johannesburg.
“South Africa is proud to host the regional centre and preparations are at an advanced stage.
SA to increase economic cooperation with BRICS partners
President Zuma said South Africa would further strengthen its relationship and cooperation with BRICS member countries in key economic areas.
“We stand ready to expand our economic cooperation with these partners in key areas such as food production, power generation, petrochemical industry, mining, tourism, renewable and nuclear energy, trade, transportation, communications, and trade,” he said.
The President said, meanwhile, that the BRICS Development Bank had been received warmly by the world’s banks.
He said it was established after BRICS leaders saw a need to introduce a bank that would cater for particularly third world countries.
“But it does not only deal with the third world. It deals with anyone who comes to seek support from the bank. It has been welcomed by all, firstly, the big world banks have received the BRICS Development Bank very well.
“They see it as an important additional factor in the global financial transactions.”
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The impact of FTAs between developed and developing countries on economic development in developing countries: A rapid evidence assessment
This Rapid Evidence Assessment (REA) addresses two questions through a review of the literature on free trade agreements (FTAs) that gives particular attention to impact assessments of substantially or fully implemented agreements.
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What has been the impact of Free Trade Agreements (FTAs) between developed and developing countries on economic development in developing countries?
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What does this evidence tell us about how developing countries might best benefit from new FTAs (such as Economic Partnership Agreements (EPAs)), and how can they avoid harm?
Focusing particularly on analyses of fully or substantially completed FTAs, the REA finds that although some aspects of these questions have been assessed extensively, others have been largely ignored and that, even in the areas where coverage is good, findings differ markedly between studies. It is based on a detailed quality assessment (QA) of 45 FTAs involving most Organisation for Economic Cooperation and Development states and 35 developing countries and regions. Most are North-South, but a strong sample of South-South agreements is also included. No systematic difference in the impact of North-South and South-South agreements was found in the assessed literature.
Evidence on FTA impact
The literature provides clear guidance to policy-makers in several areas. It is good at estimating the effect of FTAs on the parties’ trade flows. All but one of the 19 high or moderate quality primary studies that estimated trade growth found that the FTA had positive effects in at least some cases, and none found it to be negative. But the picture is mixed, with the range of estimated effects wide. In some cases the estimated trade effect was substantial, in others it was modest, and some partners were found to have gained nothing.
It also explains key factors that influence the scale of effect – many of which are within government control (although some only in the longer term). They include the following.
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The specific features of the FTA: how deep and broad are its provisions and how much policy change do they herald – and how fast? Unsurprisingly, deeper, broader, rapid change produces a bigger effect. Firms are less likely to incur additional administrative costs if the tariff advantage provided by the FTA is small. And a ‘small’ advantage can result not only from ‘residual protectionism’ (if the FTA fails to cut some tariffs) but also from ‘broad liberalism’ (if tariffs outside the FTA are already low).
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What the wider ‘trade-related’ environment looks like and the small print of the FTA (such as on rules of origin (RoO)). The FTA impact will be greater if the impediments to trade removed by the FTA are large relative to those that remain untouched.
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The most fundamental factor is the capacity of an economy to increase supply of products for which the FTA has boosted demand. This ‘supply-response’ is touched on only briefly in the literature because it is determined by a wide range of factors, many of which fall outside the ambit of an FTA (and, hence, of the impact assessments). They include not only government policies but also the country’s physical and institutional infrastructure, its human resources and all the other elements determining the short-term flexibility of an economy.
Gaps in knowledge
The literature provides little guidance on what happens in practice. None of the high and moderate quality studies estimated the distributional impact or the employment and environmental effects of fully or substantially implemented FTAs. Two studies of FTAs near the start of their implementation period flagged the potential loss of government revenue from reduced tariffs – but no study of a mature FTA estimated the actual effects (or analysed the impact of government’s response).
The minimum lesson is that at an aggregate level FTAs are in most cases neither ‘a golden bullet’ that will automatically destroy impediments to trade nor a potent source of the harm envisaged by critics. But the operative words are ‘at an aggregate level’ – particularly, though not exclusively, as regards the potential for harm.
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Conjoining new Suez Canal with China’s Belt and Road initiatives benefits world
As Egypt officially opened on Thursday its “New Suez Canal,” it is broadly believed that this project, conjoined with China’s Belt and Road initiatives, will inject strong impetus into China-Egypt cooperation and benefit the whole region and the world at large.
While the Egyptian flagship project helps spur the nation’s economic comeback, the two countries’ all-around strategic cooperation will also enhance regional security, peace, stability and development as well as global trade prosperity.
Egypt can play a key role in China’s Belt and Road initiatives due to its strategic geographic location, said Han Bing, minister counselor for economic affairs with the Chinese embassy in Cairo, told Xinhua in an interview.
China and Egypt have complementary pro-development policies, Han said, referring to the most populous Arab country’s New Suez Canal project “a good opportunity” to boost reciprocal cooperation between the two countries, which forged a comprehensive strategic partnership during Egyptian President Abdel-Fattah al-Sisi’s state visit to China in December 2014.
Proposed by Chinese President Xi Jinping in 2013, the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, known as the Belt and Road initiatives, aim to revive the ancient trade routes between Asia and Europe. The network spans over 60 countries and regions, with a total population of 4.4 billion.
Echoing Xi’s initiatives, Sisi pledged that Egypt will be an active part of the proposal, while Beijing also vowed to support Cairo’s efforts to maintain stability and growth as the nation strives to find a development path that fits its own national conditions.
Han said port cooperation should be a priority for China and Egypt as the two sides join their hands in pushing forward the Belt and Road as well as the Suez Canal economic corridor initiatives, because the harbors at both ends of the Suez Canal have a great influence over the Middle East, Africa and the entire planet in terms of geopolitics and global trade.
The North African nation plans to open six new ports and more industrial parks alongside the canal, and launch in the surrounding areas projects like a new industrial city, which is capable of hosting hundreds of factories.
“These programs can provide promising investment choices for the world, including Chinese companies...A great success has been witnessed by China and Egypt in building the Economic and Trade Cooperation Zone at the Suez Canal region,” Han said.
China’s investment in Egypt has been growing steadily over the past years, even during those chaotic periods when the country was suffering political and social upheaval, stressed the diplomat, adding that Egypt’s economic revival provides an opportunity for China to promote bilateral economic and trade cooperation.
“The new Suez Canal area will give the Chinese side more opportunities to invest in Egypt and other countries,” Egypt’s former ambassador to China Mahmoud Allam told Xinhua in a recent interview.
“Egypt decides to establish an industrial city and logistics area in the Suez Canal zone, which will attract many investors and countries, especially China,” he said.
As one of the key national projects that are at the heart of the Egyptian government’s efforts to revive the country’s sluggish economy, the New Suez Canal will offer the Chinese side the opportunity to invest more in Egypt, a vital logistics, commercial and industrial hub between European, Arab and African markets, Allam said.
Allam noted that many Chinese companies have started to invest in northwest Suez area nine years ago, and that growing Chinese investments are flowing to Egypt after China and Egypt decided to elevate their ties to a comprehensive strategic partnership.
China’s Belt and Road initiatives are of special and great significance for Egypt to develop its industries and trade markets, he said. “The initiatives will connect all countries together in their efforts to keep open to the international markets.”
“The initiative has now begun a practical implementation, I can see that the Chinese government has cost a lot of money to support the infrastructure projects carried out in this area...We have seen both sides win,” Allam said.
The New Suez Canal project, completed within only one year under strict orders by President Sisi, included a newly-dug 35-km waterway alongside the original 190-km Suez Canal, plus a 37-km expansion and deepening of some parts of the old one.
The new waterway is expected to reduce waiting and crossing time from 22 hours to 11, and will allow bigger ships to pass through, which will encourage more vessels to use the Suez Canal for their trade movement.
Egyptian officials said the new waterway will help increase the canal’s annual ship traffic revenues from 5.3 billion U.S. dollars in 2015 to more than 13 billion and even up to 15 billion by 2023, attracting huge foreign investments and creating thousands of job opportunities.
Analysts believe that the canal is only a beginning for more such development projects in the Suez Canal corridor that are expected to attract investments worth billions of dollars and produce more jobs.
“The New Suez Canal project is considered a leap forward for Egypt, especially with the development of the surrounding region,” said Ibrahim Nawwar, an economic expert and former spokesman for the Egyptian industry and foreign trade ministry.
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Nigeria’s oil industry in disarray as illicit trade booms
The Nigerian president’s sudden, unexpected and seemingly unilateral decision to ban nearly 100 oil tankers from the country’s waters has sown confusion in the operations of Africa’s largest crude exporter.
The edict directly from President Muhammadu Buhari’s office appeared to be part of a campaign pledge to crack down on oil industry corruption and theft.
But the disarray it has caused, even three weeks on, underscores the problems Buhari faces in trying, as an oil industry outsider, to tackle problems in the sector head on.
“It’s a mess,” one trader said of the ban. “Nobody knows anything concrete.”
Buhari has kept the oil portfolio for himself for now, and said that he would not appoint ministers until September. Last month, he announced plans to cleave state oil firm NNPC in two, though details are vague, and sacked the chiefs of the Navy and the Nigerian Maritime Administration and Safety Agency (NIMASA) – agencies that would help enforce the ban.
Some warn the ban could hurt the country’s near-term oil revenue more than the thieves it aims to stop.
“In the end, it’s going to make a much bigger problem for Nigeria than tanker owners,” said Ehsan Ul-Haq, senior market consultant with KBC Energy.
Traders are still struggling to get to grips with the list of tankers, which sources said is haphazard and confusing; while the headline number is 113 vessels, at least nine are listed twice, and shipping sources said one was scrapped in 2012.
Of the others, many have not called at Nigerian ports in years, if at all.
“The whole list stinks if a lot haven’t been to Nigeria for a long time,” one Nigeria-based oil industry executive said.
An NNPC spokesman and the head of crude marketing did not respond to several requests for comment. The presidency confirmed it had sent the list to NNPC but declined to elaborate on the rationale for vessels included.
Inside and outside Nigeria the origin of the list seemed to be in a locked box inside the president’s inner circle, and NNPC itself appeared only to have limited information. Oil traders who asked NNPC officials directly for answers said their attempts had borne little fruit.
Clawing back stolen oil
Oil theft is rampant in Nigeria; the country has estimated losses at as much as $35 million per day – roughly a quarter of its gross domestic product.
Buhari has vowed to recover the “mind-boggling” amounts of stolen oil money, enlisting help from the United States.
The theft comes at various points – siphoned from pipelines, diverted from loaded vessels and via paper accounting fraud.
Much of the stolen physical oil, country observers say, ends up on very large crude carriers (VLCCs) like those now banned.
Some said the ban could be a shot across the bow at those engaged in illegal activities or who look the other way when it happens involving their ships.
“What NNPC appears to be doing is attempting to get vessel owners to be more proactive in ensuring their vessels are used only for legal business,” one trader said, noting this is an important goal for the country.
The source added, however: “It’s a fairly blunt instrument.”
The confusion has sparked concerns that more tankers could be added to the list. As a result, some could avoid Nigerian ports altogether, while others could demand higher rates to call there.
Some traders are also pressing for lower official selling prices from NNPC to compensate for any difficulty the ban creates; if successful, this would hit Nigeria’s already battered revenue even harder.
Oil theft
Nigeria’s oil-rich Niger Delta region is losing its battle against organised oil theft. According to the former MD of the Shell Petroleum Development Company, Mutiu Sunmonu, oil theft by local groups currently results in a total of $6bn per year in lost revenue to the corporate giant. Other major oil companies have also said they were losing a huge amount of money due to oil theft, and are paying huge amounts for security.
The “blood oil” industry, a term coined by Nigerian President Goodluck Jonathan, is reportedly run by armed groups as well as activists calling for a fairer distribution of the country’s enormous oil profits. The majority of Nigeria’s 160 million citizens live in poverty – despite being residents of Africa’s biggest oil producer.
Zoin Ibegi is a resident of the region. “Many of us live [on] less than one cent a day despite being blessed with crude oil,” he said. “This forces many of us into the illegal refinery business because we can’t continue in poverty.”
The Nigerian government has deployed soldiers to the restive region to eradicate these “firewood distilleries”, as they are commonly known. When an illegal oil refinery is located, those involved are arrested and the refinery is burnt down. According to Onyema Nwachukwu, a spokesman for Nigeria’s Joint Task Force, such methods are used in order to make it difficult for perpetrators to return to the illicit oil extraction trade.
In 2009 an amnesty was declared, paying off people who had been engaged in “oil bunkering”: stealing and selling oil, then sharing the profits with the community.
However, the siphoning of oil and makeshift oil refineries are only part of the problem. Oil-producing areas also suffer from high levels of pollution, and Ibegi says the liquid often spills into rivers used for fishing.
Many observers believe that the 2009 amnesty is not working, claiming it is just a way to buy off “troublemakers”. They argue that ultimately, the core problems affecting people in the Niger Delta – poverty and inequality – have not been addressed.
“Nigerian grades have already been suffering … this will increase their pain,” Ul Haq said, noting the global excess of crude. “They will soon realise this is not the right way of dealing with oil theft.”
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tralac’s Daily News selection: 6 August 2015
The selection: Thursday, 6 August
Sh850bn Suez Canal opens today (Business Daily)
Thousands of regional dignitaries and millions of Egyptians gather Thursday as the country opens its mega maritime infrastructure set to double revenues from international trade. The Sh850 billion second Suez Canal promises to be a catalyst for inter-cementing Egypt’s position in the global trading arena and propelling its centuries old maritime industry. Egypt President Abdel Fattah El Sisi is due to host visitors from all over the world in the opening feat. The new vessel channel will funnel close to 15 per cent of world trade to Egypt and effectively to Africa.
Egypt celebrates new Suez Canal, but real challenges lie ahead (Ahram)
Multimedia: Egypt opens $8.2bn new Suez Canal (Bloomberg)
Infograph: The new Suez Canal in numbers (Ahram)
Willemien Viljoen: 'African economies unable to resist the protectionist impulse' (tralac)
Increased protectionism can lead to unintended consequences for many African economies. Inward-looking policies can have the undesired effect of jeopardising their growth prospects, developmental goals and industrial development. Import products are often an important intermediate input into the manufacturing process, including agro-processing. Increasing the cost of these intermediate products can have negative effects on the cost of production for downstream industries along the value chain, raising the cost of the final product and eroding competitiveness on regional and world markets.
Deep integration in Eastern and Southern Africa: what are the stakes? (Journal of African Economics)
Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs, especially in sub-Saharan Africa. We decompose trade costs into (a) trade facilitation; (b) non-tariff barriers and (c) the costs of business services. We develop a conceptually innovative model and new dataset to assess deep integration to reduce these three types of trade costs in the ‘Tripartite’ Free Trade Area, within the EAC alone and unilaterally by the EAC.
We find that there are substantial gains for all six of our African regions from deep integration in the Tripartite FTA or comparable unilateral reforms by the EAC; but the estimated gains vary considerably across countries and depend on the reform. Thus, countries would have an interest in negotiating for different reforms in different agreements. Tariff removal in the Tripartite FTA would produce only small losses or gains, depending on the country. Interestingly, we estimate that Kenya gains less from comparable unilateral liberalisation by the EAC than from the Tripartite FTA, due in part to an umbrella of protection in services markets in the Tripartite region. [The authors: Edward J. Balistreria, David G. Tarrb, Hidemichi Yonezawac]
TFTA a building block for Continental Free Trade Area (New Era)
Minister of Industrialisation, Trade and SME Development, Immanuel Ngatjizeko, yesterday warned that Namibia needs to increase its industrial capacity to take advantage of the opportunities provided by the TFTA. “Namibia in particular places industrialisation at the centre of its development strategy, hence the need to expand our industrial base is more important now than ever,” said Ngatjizeko during a public seminar on regional and continental economic integration arrangements.
One of the issues still to be agreed upon is the movement of business people within the TFTA. “All signatories to the agreement need to provide unrestricted, yet guided market access for business persons engaged in trade. Negotiations are still ongoing on this protocol and one of the contentious issues is who is to be considered a trader,” explained director of trade in the trade ministry, Benjamin Katjipuka.
Zimbabwe: Govt engages contractor on Beitbridge (Financial Gazette)
The project will encompass upgrading the road network to and from the bridge, installing a perimeter fence and gate control infrastructure; establishing parking areas and a commercial centre as well as building staff accommodation. It will also include setting up a weighbridge, upgrading the communication and security systems; installing lighting systems, computerisation of the border post and construction of a new bridge, among other things. The project will also include measures to strengthen collaboration between the South African Revenue Services and the Zimbabwe Revenue Authority (ZIMRA) by harmonising their customs systems and procedures. ZIMRA's information technology also needs to be upgraded to minimise downtime, which adds to delays in processing documentation.
54 transborder checkpoints spur complaints (GhanaWeb)
Ghana’s security agencies have come under severe criticism from transborder operators for mounting scores of permanent and temporary checkpoints that contravene the ECOWAS convention on transit goods. The transborder operators cited the Tema-Paga route as the most stressful as the security agencies have put up 42 police and 12 customs checkpoints along the route, which is more than the three checkpoints recommended by ECOWAS to be on that stretch of road including checkpoints at the port, the Paga border and final point of destination.
CPIA Africa: Assessing Africa’s policies and institutions (World Bank)
The overall quality of government policies and institutions designed to spur development and reduce poverty in African countries remained steady in 2014, with the greatest progress made in budgetary and financial management, according to a new World Bank review. The latest Country Policy and Institutional Assessment Africa analysis “Assessing Africa’s Policies and Institutions” describes the progress and challenges faced by governments in Africa when strengthening the polices, institutions and programs that help boost sustainable development.
Beneath the flat regional trend, the range of CPIA scores for the region widened. Ten countries experienced a climb in the overall CPIA score. A strengthening of policy reforms boosted Rwanda’s CPIA score to 4.0 and elevated it to the top of the list, just above Cabo Verde’s 3.9 score. Kenya, Senegal, and Tanzania followed closely behind, all with scores of 3.8. Among the countries with gains, Zimbabwe led all with a large 0.4-point increase to 2.7.
Africa Open Data Conference: 2-5 September, Dar es Salaam
AGOA and South Africa: feedback on consultative meeting (AgBiz)
Agbiz attended the AGOA Consultative Meeting on the 31st July 2015 at the dti Campus, in Pretoria. The meeting was chaired by the special Envoy on AGOA, Ambassador Faisil Ismail. The objective of the meeting was to determine how government and industry should proceed regarding South Africa’s out-of-cycle review under AGOA. Four specific issues were discussed, and these included: (i) an update of the AGOA out-of-cycle review (ii) an update on the implementation of the poultry quota, and (iii) an update of the SPS issues on beef, pork and poultry.
Peter Leon: 'Amended bill still takes SA out of step with rest of world' (Business Day)
After a 20-month gestation, the Department of Trade and Industry has finally made good on its promise to revise the Promotion and Protection of Investment Bill, which was originally published for public comment late in 2013. Unfortunately, the bill introduced to Parliament by Trade and Industry Minister Rob Davies last week does little to assuage the original criticism of the legislation. This is particularly so in the bill’s domestication of international investment protection at a time when the trend, globally, is the internationalisation of such protection. It follows, of course, the 2012-13 termination of SA’s bilateral investment treaties with members of the European Union, a trend that has not so far extended to South America, China, Russia or the rest of Africa.
Submission on the South Africa’s Expropriation Bill 2015 (PLAAS)
East Africa: Regional body cuts share transfer time (Daily Monitor)
The East African Securities Exchange Association has reduced the period of transferring securities (shares) from one stock exchange to another to between 24 to 48 hours from one week. The EASEA said the new move now makes transfer and trading of securities/ shares easier for investors in the region’s stock exchanges. At the end of their 25th consultative meeting held last week in Kampala, the members of EASEA announced that movement of securities across East Africa has been made easier as a result of automated trading system in Nairobi, Dar-es-Salaam and Uganda securities exchanges.
Northern Corridor: Telecoms slash SMS, data costs (New Times)
Telecom operators in Rwanda have begun revising downwards their short message service and data charges from Rwanda to countries within the Northern Corridor region marking the beginning of the second phase of the One Network Area. The revised costs will apply to SMS charges from Rwanda to Kenya, Uganda and South Sudan. Tigo Rwanda was the first to lower the charges on Tuesday this week by about 45%, from Rwf75 to Rwf45.
Kenya loses its position among Africa’s top 10 foreign investment destinations (New Times)
A new report that lists the investment climate across all 54 economies in Africa indicates that East Africa’s economic giant is trailing her neighbours in terms of attracting top investments. The study conducted by diversified financial services brand, Rand Merchant Bank, ranks Kenya 11th, having fallen from the top 10 bracket since the previous study released last year.
Kenya: Policy guidelines if adopted could ease doing business in the counties (Soko)
Governors and various stakeholders have welcomed the launch of policy guidelines for the drafting of County Revenue Laws saying these guidelines if well implemented would help facilitate ease of doing business at the county and inter-county level. They made these remarks on 4 August 2015 during the launch of the Legislative and Economic Policy Framework guidelines that have been developed by The Commission on Revenue Allocation and Kenya Association of Manufacturers that will provide guidelines for drafting of County Revenue Laws in Kenya. These two documents that were officially handed over to County Governments should assist Counties with proper drafting of county revenue laws that will facilitate business and attract investments. [Downloads available]
On the drivers of inflation in Sub-Saharan Africa (IMF)
We find that in the past 25 years, the main drivers of inflation have been domestic supply shocks and shocks to exchange rate and monetary variables; but that, in recent years, the contribution of these shocks to inflation has fallen. Domestic demand pressures as well as global shocks, and particularly shocks to output, however, have played a larger role in driving inflation over the last decade. We also show that country characteristics matter—the extent of oil and food imports, vulnerability to weather shocks, economic importance of agriculture, trade openness and policy regime, among others, help in explaining the role of shocks.
The resource curse revisited (Chatham House)
This paper challenges the view that the ‘resource curse’ – for which so many academics found evidence in previous decades – has now been laid to rest. The extractives-led growth agenda promoted by donors and international advisers in multilateral banks, consultancies and some development agencies has tended to reinforce domestic, government and investor pressures to pursue a ‘fast-track’ approach to extractives projects. This appears logical, given the obvious benefits of foreign-investment inflows and export revenues for countries suffering from poverty, lack of infrastructure and high levels of indebtedness. However, there is an urgent need to re-evaluate whether the policy advice stemming from this agenda can serve as an antidote to the negative effects identified in the resource-curse literature.
@KAM_kenya: The EAC meeting, 3-7 August, is aimed to afford stakeholders the opportunity to consult the TFTA rules of origin. View the @KAM_kenya TL for further details.
Daniel Steinmann: 'A free trade area with unlimited liquidity' (Namibia Economist)
Dark days loom for farmers as fears of El Niño rise (New Era)
South Africa: Home Affairs on compliance with child travel requirements (GCIS)
Nigeria’s auto plans can help us, says Nissan SA (Business Day)
Zimbabwe: Minister tells SA investors to take advantage of job cuts (NewsDay)
José Antonio Ocampo: 'A defeat for international tax cooperation' (Project Syndicate)
Jonathan Glennie, Andy Sumner: 'Aid should be seen as foreign public investment, not just charity' (The Guardian)
India cancels EU trade talks over pharma ban (LiveMint)
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Aid should be seen as foreign public investment, not just charity
As new players from the emerging economies enter the aid arena, the thinking that underpins much development cooperation needs to change
International development has reached a crucial moment in its evolution. Given the great progress in much of the world in the past decade or so, the paradigm of north-south development assistance is now outdated. All countries are engaged in contributing to global development, supporting sustainability and poverty reduction locally, nationally, regionally and globally.
At the same time, the challenges faced by the world, in particular the poorer countries, are evolving and, to some extent, multiplying. The post-2015 discussions are firming up an agenda in which ending absolute poverty remains central but other concerns are also recognised, namely the planet’s environmental limits and the need to invest in greener growth.
In this context, the future of development aid is the subject of heated debate. Is it still needed? Who should give it? How should it evolve?
In our view, the era of international aid is not ending; it is still in its infancy. This is evidenced by the plethora of new aid agencies, both public and private, to emerge in recent years to complement, or challenge, traditional sources of funds.
But people in many aid-giving countries are not so sure (to say the least). They question the simplistic “aid works” narrative; assertions that aid is responsible for impressive improvements in human development in the past couple of decades are hard to substantiate.
More fundamentally, perhaps, they find sending large amounts of money abroad hard to justify when times are hard at home. The thinking that underpins much development cooperation has to change if we are to make the case for aid in a new era. We need a new narrative on aid.
We propose reimagining aid as foreign investment. There are four main reasons why.
First, the language of investment better reflects the reality of modern aid. The charity paradigm has long been considered patronising by most poor countries, and is increasingly considered old-fashioned even in many “donor” agencies. The reality that strategic and economic interests have always been at play in aid-giving is recognised by most DAC, or developed country, donors somewhat cautiously, but is explicitly promoted by the “emerging” contributors of development cooperation in the global south.
These “emerging donors” eschew the term aid because of its simplistic connotations, preferring the language of “mutual benefit”. They want to imply “horizontal” relationships between equals, fundamentally similar to business transactions. Investment, not charity.
The origins of official development assistance (ODA) as reconstruction began in the aftermath of the second world war would align with this understanding of aid as foreign investment for mutual benefit.
Second, the differentiation between private investment and public aid depends on a stark separation of these two realms that has been common, at least in rhetoric, in the more advanced economies but is much more fluid in many of the emerging economies, including the Brics. Separating foreign spending into public aid and private investment is complicated by the active role played by the state in economic and business affairs.
Third, reframing aid as a form of foreign investment could be beneficial if it helps make resource transfer more accountable, shifting from charitable donations to contracts with accountability, transparency, recognition of possible failure and evaluation as key elements of a longer-term relationship.
And fourth, crucially, the copious literature on foreign private investment in developing countries (particularly foreign direct investment or FDI) is instructive for many aspects of the debate on the effectiveness of aid. Both aid and foreign investment can support growth and development, but when and where is a matter of context and specific decisions. This literature should inform aid debates, rather than being siloed off as a separate research topic.
The foreign investment literature is contested, but there does appear to be one area of consensus that isn’t evident in the aid literature: FDI works for the host country under certain conditions. The three factors that seem to make FDI more or less supportive of development objectives (as opposed simply to profit realisation by the investor) are:
- Country context (the “prior” conditions);
- Type of FDI (the nature of the investment and decisions made by investors)
- Policies governing FDI (decisions made by host governments to actively manage FDI).
These factors could equally well apply to international aid and could encourage a more profound understanding of “aid effectiveness”, especially as the Paris aid effectiveness consensus appears to be struggling to survive.
The investment analogy has its limits, naturally. Most private investment is made for profit, while interventions in the field of international cooperation seek primarily to further internationally agreed development objectives. Therefore, using the language of foreign investment should not be seen as denying the element of solidarity inherent in development cooperation.
Instead, it could add a further layer to our conceptualisation of aid, and encourage us to move beyond the “recipient of charity” mentality, towards mutuality and working together for agreed outcomes.
For all these reasons, it is time the aid community started to talk about aid as investment not just charity. It could start by renaming aid “international public investment”.
Jonathan Glennie is a writer and researcher on international development and co-operation. Andy Sumner is co-director of the International Development Institute at King’s College London.
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Policy guidelines if adopted could ease doing business in the counties
Governors and various stakeholders have welcomed the launch of policy guidelines for the drafting of County Revenue Laws saying these guidelines if well implemented would help facilitate ease of doing business at the county and inter-county level.
They made these remarks on 4 August 2015 during the launch of the Legislative and Economic Policy Framework guidelines that have been developed by The Commission on Revenue Allocation (CRA) and Kenya Association of Manufacturers (KAM) that will provide guidelines for drafting of County Revenue Laws in Kenya. These two documents that were officially handed over to County Governments should assist Counties with proper drafting of county revenue laws that will facilitate business and attract investments.
According to KAM Chief Executive Ms. Phyllis Wakiaga counties have taken shape within their functions however they need to remain competitive without being unattractive to investors. “Manufacturers together with other traders continue to experience challenges as counties introduce very high taxes that are acting as a barrier to distribution of goods across the country. Such include entry fees, multiple distribution fees, multiple vehicle branding fees, single business permits demanded in every county of distribution, Cess, Building Plan approvals, export certificates amongst others.”
The launch of these policy documents by CRA and KAM is an initial step towards mentoring the Counties on doing it right in order to support business growth in the Country. KAM is looking forward to a lasting solution to this issues that are ailing industry. “It is our desire that as the Counties warm up to pass their 2015/2016 Finance Bills, they shall be properly guided by the two documents that we are launching today,” she said.
The Chairman of the Commission on Revenue Allocation, Mr. Micah Cheserem, urged the private sector to prioritise the top key issues per county and work with the county government to have these issues addressed.
The meeting was attended by governors Wycliffe Oparanya, Dr. Evans Kidero and Prof Kivutha Kibwana who are hopeful that the model laws will help facilitate the operations of the counties. They called on the national assembly to facilitate the actualization of such legislation within the shortest time possible. The legislation should be standard and promote movement of goods within the counties and curb double taxation. Payment of cess from county to county should be addressed as this is increasing the cost of business and ultimately the cost will be passed on to the consumer.
The governors further echoed the need to harmonise laws within the different counties. “Inconsistencies in revenue collection needs to be addressed as well as the development of a rating act. There is dire need for an updated rating act which is reflective of the current economic situation and developments in the country.” They also called for capacity building at county level and the need to take into consideration specific county needs as not all counties are the same.
The meeting concurred on the need for public participation as this is the forum provided for consultations and receiving feedback from the public and private sector players. “Public should be involved so that there is ownership in the process and in the end product and public not caught up by surprise.”
County Assembly speakers forum representative called on the National and county governments to be accountable for the revenue that has been allocated to them. “Taxes must not be the driver of devolution rather the ability to deliver facilitation for business and investments. Taxes should be put in the right place and ploughed back to infrastructure and other projects that will advance this economy.” He implored upon the counties to focus on delivery saying “Every governor must leave a track record of performance that will speak to a re-election for another term.”
During the National conference themed “Doing Business with Counties,” that was held in October 2014 one of the resolutions and way forward was for CRA and KAM to facilitate county governments to review and develop suitable revenue legislation that would boost revenue collection and assist counties to attract and retain investors.
In addition to the draft laws that were developed for all 47 counties (available on the CRA website here) these two additional policy guidelines have been developed to further assist Counties on proper drafting of county revenue laws.
KAM emphasized on the urgency to revisit the Trading laws developed in the Counties and to align them to the licensing reforms that Kenya embraced in the early 2000’s. The meaning and purpose of this permit has been destroyed with the issuance of multiple permits and licenses that are intended to be components of the single business permit. “The demand for the same in every county continues to make the situation worse for our traders,” said Ms. Wakiaga. KAM called upon the Council of Governors, CRA, IBEC and the other relevant Government entities to give this issue the attention it deserves.
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Kenya loses its position among Africa’s top 10 foreign investment destinations
Kenya has fallen behind Tanzania and Rwanda as the top investment destination in East Africa, dampening the country’s ambition to become a regional leader in tapping foreign direct investment.
A new report that lists the investment climate across all 54 economies in Africa indicates that East Africa’s economic giant is trailing her neighbours in terms of attracting top investments. The study conducted by diversified financial services brand, Rand Merchant Bank, ranks Kenya 11th, having fallen from the top 10 bracket since the previous study released last year.
Leading economy
South Africa has been ranked as the most attractive investment destination, extending its lead and maintaining its position as the leading economic powerhouse in Africa despite Nigeria’s rebasing its Gross Domestic Product (GDP) last year and rising to the top position of African economies.
Nigeria, Ghana, Morocco and Tunisia are the other top five economies in Africa respectively with Egypt slipping three slots to the sixth position. The other countries in the top ten positions are Ethiopia, Algeria, Rwanda and Tanzania with Kenya and Libya dropping out of the top 10.
“2014 was a less favourable year for Africa’s investment attractiveness ratings,” the report released last week reads in part, adding that “Not only did the continent’s overall investment attractiveness deteriorate, but 22 countries received lower scores.”
The report further states that part of the deterioration seems temporary due to issues like religious extremism, political upheavals or the Ebola crisis, although more reforms are needed if the recent economic boom is to be sustained.
“Kenya is certainly East Africa’s gateway for foreign investment. There are plans to transform Nairobi into an international banking and financial hub in the next two decades, but authorities face a plethora of challenges (including an inefficient legal system, graft, and the failure to put into practice a double taxation treaty with Uganda and Tanzania) that hamper access to finance,” states the report.
Rwanda and Ethiopia are emerging as strong contenders to unseat Kenya as the economic powerhouse in the Eastern African region.
“Rwanda is a tiny country, but its reform efforts have been so outstanding that it is reaping rapid rates of economic growth and associated improvements in the business environment. Ethiopia’s position comes about because of rapid growth and its large population,”adds the report.
Meteoric growth
Rwanda, which leads the East African countries, continues its meteoric growth, which has since seen its ranking as an ideal investment destination rise from 39 in 1999 to the ninth position this year.
The report comes days after Kenya hosted the 6th Global Entrepreneurship Summit (GES) that saw thousands of entrepreneurs from all over the world converge for the meeting that was officially opened by US President Barack Obama and President Uhuru Kenyatta.
Kenya is further set to host the 10th Ministerial Conference of the World Trade Organisation (WTO) in December this year after winning the bid to hold the high-profile summit that will once again see the business world converge at the East African nation for the second time in less than six months.
The General Council last year agreed that the conference be held in Nairobi, Kenya from December 15 to 18, 2015. The Ministerial Conference is the topmost body of the WTO under the governance structure set up by the “Agreement establishing the WTO”.
RMB’s 2014/15 rankings of the most attractive countries for investment in Africa (top 20)
2014 rank | Country | Score | World rank | 2013 rank | |
---|---|---|---|---|---|
1 | South Africa | 5.72 | 35 | 1 | |
2 | Nigeria | 5.62 | 43 | 2 | |
3 | Ghana | 5.45 | 49 | 4 | |
4 | Morocco | 5.45 | 50 | 5 | |
5 | Tunisia | 5.28 | 58 | 6 | |
6 | Egypt | 5.25 | 59 | 3 | |
7 | Ethiopia | 5.24 | 60 | 8 | |
8 | Algeria | 5.07 | 67 | 12 | |
9 | Rwanda | 5.06 | 70 | 14 | |
10 | Tanzania | 5.05 | 71 | 9 | |
11 | Kenya | 5.04 | 72 | 10 | |
12 | Botswana | 5.00 | 75 | 11 | |
13 | Uganda | 4.91 | 79 | 15 | |
14 | Zambia | 4.88 | 86 | 13 | |
15 | Mauritius | 4.84 | 88 | 16 | |
16 | Côte d'Ivoire | 4.69 | 96 | 17 | |
17 | Mozambique | 4.68 | 97 | 18 | |
18 | Angola | 4.63 | 100 | 20 | |
19 | Libya | 4.59 | 103 | 7 | |
20 | Burkina Faso | 4.55 | 107 | 21 |
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In Africa, progress in country-led government reforms
The overall quality of government policies and institutions designed to spur development and reduce poverty in African countries remained steady in 2014, with the greatest progress made in budgetary and financial management, according to a new World Bank review.
The latest Country Policy and Institutional Assessment (CPIA) Africa analysis, “Assessing Africa’s Policies and Institutions,” describes the progress and challenges faced by governments in Africa when strengthening the polices, institutions and programs that help boost sustainable development.
The CPIA scores countries on a scale of 1 to 6 (with 1 the lowest and 6 the highest), for 16 indicators in four policy areas, to reach a country’s overall score. The areas are economic management, structural policies, social inclusion and equity, and public sector management and institutions.
The ratings help determine the allocation of zero-interest financing for the African countries that are eligible for support from the International Development Association (IDA), the World Bank Group’s fund for the world’s poorest countries.
The average CPIA score for these African countries was 3.2 in 2014.
“The sharp drop in commodity prices in 2014 put pressure on current account and fiscal balances in the region’s commodity exporters, presenting a challenge to countries with depleted policy buffers,” says Punam Chuhan-Pole, Acting Chief Economist for the World Bank Africa Region and the report’s author. “One bright spot on the economic management front was progress in debt policy and management, where Chad, Côte d’Ivoire, the Democratic Republic of Congo, Madagascar and Zambia all saw improvements.”
The Lead Performers
Beneath the flat regional trend, the range of CPIA scores for the region widened. Ten countries experienced a climb in the overall CPIA score. A strengthening of policy reforms boosted Rwanda’s CPIA score to 4.0 and elevated it to the top of the list, just above Cabo Verde’s 3.9 score. Kenya, Senegal, and Tanzania followed closely behind, all with scores of 3.8. Among the countries with gains, Zimbabwe led all with a large 0.4-point increase to 2.7.
Elsewhere, countries transitioning out of violence saw modest improvements. For the fourth consecutive year, Côte d’Ivoire’s focus on a broad range of policy reforms lifted the CPIA score to 3.3. Ongoing policy development progress, especially in the area of governance, saw an uptick in the CPIA scores for Chad and the Democratic Republic of Congo.
South Sudan (which saw a decline in its score) and Eritrea – both countries struggling with deep policy challenges – had the lowest score at 2.0. The Central African Republic’s CPIA score dropped from last year’s rating, illustrating that conflict quickly eats away at policy gains.
Strengthening Good Governance
The overall quality of economic management in Sub-Saharan Africa weakened in 2014, underscoring the region’s vulnerability to adverse movements in the price of commodities such as oil, metals, and minerals. By contrast, nearly one-fourth of countries had CPIA gains in governance-related reforms. Six countries posted gains related to budgetary and financial management policy development and some others made progress on transparency and accountability. This trend suggests that governments are responding to their citizens’ demand for improved transparency in public affairs and better use of public resources.
“This review shows that 24% of countries in Sub-Saharan Africa showed improvements that strengthen governance-related policies,” Chuhan-Pole said. “Governance quality and performance is increasingly viewed as a transformational element for sustainable and inclusive development. Thus, greater attention to strengthening property rights and rules-based governance, enhancing the quality of public administration, and addressing corruption is desirable.”
Côte d’Ivoire, the Democratic Republic of Congo, Mozambique, and Uganda all saw improvement in financial inclusion, thanks to policy reforms related to access to finance. Mobile banking helped to accelerate this access: almost a third of account holders in the region – or 12 percent of all adults – reported having a mobile money account.
Social Inclusion, Gender Equality
Up to eight countries in Africa deepened policy reforms for health services. Yet several countries continue to show extremely high rates of maternal mortality, with only about half of all deliveries attended by skilled health care providers.
The analysis concludes that the CPIA score for Africa’s non-fragile countries continues to be similar to those of non-fragile countries outside the region. And Africa’s fragile countries continue to lag behind in the CPIA scores of fragile countries in other parts of the world, showing that there is still work that can be done to improve the quality of life for men and women in Africa.
Main CPIA Findings
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More than 50% of the countries in the region saw a change in their policy environment: 10 countries experienced a lift in their overall CPIA score, and an equal number saw deterioration.
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The sharp drop in commodity prices and continuing fiscal policy slippage weakened economic management reforms.
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Nine countries improved governance policies – more than twice the number of countries with declines – with the greatest progress in budgetary and financial management.
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Recent trends show that better debt management has helped to keep debt burdens at modest levels and strengthen debt sustainability.
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tralac’s Daily News selection: 5 August 2015
The selection: Wednesday, 5 August
Is the World Bank’s ‘Doing Business’ report at odds with how business is done in the developing world? (Wall Street Journal)
The Doing Business report “does not summarize even modestly well the experience of firms as reported by the Enterprise Surveys,” Ms. Hallward-Driemeier and Mr. Pritchett write in the latest edition of the Journal of Economic Perspectives. Mr. Pritchett said in an interview that for developing-country policy makers, focusing on rising in the Doing Business ranks could draw scarce resources away from more-substantive reforms that would help the government better administer and enforce business regulations.
SA meets all criteria to remain in AGOA for the next ten years – Minister Rob Davies (GCIS)
“A public hearing is scheduled to take place in Washington DC on Friday where South Africa will make written and oral statement. An AGOA stakeholder meeting was convened by the Department of Trade and Industry (the dti) in Pretoria last Friday where we agreed on an approach to the public hearing. Government and other stakeholders agreed to coordinate their messaging to the public hearing,” said Minister Davies. He added that the SA submission will argue that the country is eligible for continued participation in AGOA for five mains reasons:
AGOA: notice of initiation of an out-of-cycle review of South Africa eligibility for benefits (USTR)
US proposes new cargo regulations to boost surveillance at Kenya ports (Business Daily)
The US is proposing radical changes in Kenya’s port cargo handling procedures to help reduce illicit trade and lock out high-risk consignments. The US government wants Kenya to adopt the Cargo Targeting System for cargo processing, the two nations said in a joint communiqué following the recent visit by President Barack Obama. The revelation came ahead of a visit to Washington by a senior Kenyan delegation to discuss best practices in port management.
Uganda: Govt proposes 80% weighbridge compliance (Daily Monitor)
South Africa: Tourism 2014 report (StatsSA)
This report is based on information on population movements across South Africa’s ports of entry/exit covering the period from 1 January 2014 to 31 December 2014. It covers data on arrivals and departures of South African residents and foreign travellers. A detailed analysis of the data on foreign tourists with respect to: mode of travel, purpose of visit, sex and age distribution is covered. The report also describes trends in the overall number of travellers and tourists from 2000 to 2014.
Zimbabwe-SA seal historic tax, fiscal agreement (The Chronicle)
Zimbabwe and South Africa yesterday signed a Memorandum of Understanding on avoidance of double taxation and prevention of fiscal evasion in a move aimed at protecting tax payers and improving bilateral relations. Minister Chinamasa said the signing of the agreement was significant as it elevates the bilateral relationship between the two neighbouring countries to a new level. The permanent secretary in the Ministry of Finance and Economic Development, Willard Manungo, said Zimbabwe and South Africa were currently applying the provisions of the outdated avoidance of double taxation agreement that entered into force in 1965. “It’s clear that the provisions of this agreement are no longer reflective of current international trends in investment, taxation and mobility of labour. It was, therefore, necessary that the two countries initiate the process of re-negotiating this agreement."
Communication costs and trade in Sub-Saharan Africa: 11 August seminar notice (HSRC)
The impact of the cost of information gathering and transmission of messages has often been neglected or has been subsumed under transport costs or border related trade barriers. It is however important to model these costs separately as the share of services in world trade has increased dramatically over the last three decades and advances in information and communication technology (ICT) have made distance seem less important in the setup of trade transactions. The study empirically tests the hypothesis that high communication costs in Sub Saharan Africa have a negative impact on the intensity of trade between African countries.
Regional industrialisation and regional integration: access event papers from the TIPS Annual Forum
G Struyf: Supporting regional food security through enhanced agricultural supply chains
C Phangaphanga: The Malawi poultry industry and regional integration a case of local policy support and value chain growth
B Byiers and J Vanheukelom: Political drivers of Africa's regional economic integration: Lessons from Maputo and North-South corridors
M Muller: Contribution of cooperative management of water resources to regional integration in SADC
Mainstreaming and implementing disaster risk reduction measures in Southern Africa (SADC)
As the SADC sub-region recognises that ‘disasters are a development problem’, mainstreaming disaster risk reduction in development processes is likely to contribute to the resilience of this sub-region to disasters. This report provides an assessment of the extent to which DRR has been mainstreamed and implemented in the SADC sub-region. The specific objectives of the assessment were to:
Carlos Lopes: 'The role of big data in Africa’s regional integration' (UNECA)
Summarizing information from more than 70 indicators, the index tracks progress and identifies bottlenecks to be addressed, informs policy decisions and helps with future trade negotiations. In support of its implementation, the ECA is training countries and sub-regional entities in Africa on data collection and supervision. Given the novelty of some of the indicators being used, efforts are also being made to standardize databases. The use of ‘big data’ techniques has offered opportunities for the index to be a frontrunner of innovative methodologies. For instance, collection of airline data to provide datasets on flight patterns between airports is used to calculate an aggregate of intra-African flights; or trade tariff data is employed to calculate averages of trade-weighted intra-African tariffs.
CEMAC: common policies of member countries (IMF)
CEMAC growth remained robust in 2014, but the full effect of the oil-price shock will be felt in 2015. Regional growth is estimated to have reached 4.7%, driven by an increase in oil production and the continuation of public investment programs. Nonetheless, growth in 2015 is projected to slow down to 2.8%, mostly because of lower public investment. Inflation remains below the regional inflation criterion of 3%. The regional fiscal deficit is estimated to have widened to 5.0% of regional GDP in 2014 and is projected to deteriorate to 5.7% in 2015.
Mozambique: fourth review under the policy support instrument (IMF)
The economic outlook remains positive. Growth is expected to reach 7% in 2015 and inflation to remain low. Substantial policy adjustment is underway to respond to slippages around the elections and new balance of payment pressures from low commodity prices. Fiscal adjustment, greater exchange rate flexibility and stronger liquidity management are essential to preserve macroeconomic stability and continue to attract foreign investment to support growth, including in the oil and gas sector where projected investments could reach $100bn over the next decade.
President Filipe Nyusi’s state visit to India: selected updates
India, Mozambique to deepen economic engagement
India, Mozambique discuss boosting maritime security cooperation
Text of Prime Minister Modi's statement at media briefing with President Filipe Nyusi
Modi Ocean overdrive with eye on China
Mozambique: Government doubles imported sugar reference price to boost production (Club of Mozambique)
In a measure aimed at ending unfair competition that has left local sugar farmers at a disadvantage, the government for the first time in 15 years yesterday updated the reference price for imported sugar. The update, which came into force yesterday, more than doubles this to US$806.00 per tonne for brown and US$932.00 for the refined product.
Zimbabwe: Second-hand clothes, shoes ban backfires (NewsDay)
Finance minister Patrick Chinamasa was yesterday asked to reverse a ban on the importation of second-hand clothes and shoes or risk his Mid-Term Fiscal Review being rejected by the National Assembly. Members of Parliament from across the political divide said they would not pass the Finance Bill to operationalise Chinamasa’s 2015 Mid-Term Budget Review in its current form because it was insensitive to the poor. Meanwhile, the Parliamentary Portfolio Committee on Finance and Economic Development chaired by David Chapfika (Zanu PF) said the Mid-Term Budget statement failed to attend to poverty reduction issues such as food security and introduce measures to harness revenue into the fiscus.
Reserve Bank governor John Mangudya to present mid-term monetary policy review today (NewsDay)
China experts meet VP Mnangagwa (The Herald)
Fish farming now a big hit in Africa (Inter Press Service)
Faced with nutritional deficits, a number of Africans have turned to fish farming even in towns and cities to complement their diets. In Zimbabwe, an estimated 22,000 people are involved in fish farming, according to statistics from the country’s Ministry of Agriculture. The figure for fish farmers is even higher in Malawi, where some 30,000 people are active in fish farming-related activities, according to the FAO. Fisheries are reported to contribute about 70 percent to the protein intake of the developing country’s estimated 14 million people, most of whom are too poor to afford meat.
Inside NNPC oil sales: a case for reform in Nigeria
Nigeria must urgently reform the way it sells oil to prevent Africa’s biggest crude producer losing billions of dollars of revenue, according to a new report. The approach of the national oil company, Nigerian National Petroleum Corp., “suffers from high corruption risks and fails to maximize returns for the nation,” the New York-based National Resource Governance Institute said in a 73-page report published on Tuesday. [Download]
Environmental Goods Agreement trade talks eye August list (BioRes/ICTSD)
The chair of talks designed to liberalise environmental goods trade will compile and circulate a draft consensus list of products slated for tariff cuts in the coming weeks, trade sources confirmed at the close of a negotiating round held last week in Geneva, Switzerland.
World Bank’s Environmental and Social Framework: revised draft (World Bank)
The proposed framework presents a risk- and impact-based approach to protecting the environment and people, and features a strong emphasis on risk management and achieving sustainable development outcomes over the life of projects; broadened social assessment and management of environmental and social risks; greater clarity of the roles and responsibilities of the World Bank and Borrower; increased harmonization with development partners and recognized good international practices; and renewed and strengthened partnerships with borrowers. The proposed revision has evolved significantly from the first draft:
Digital solutions to steer financial inclusion in Africa (AfDB)
There is growing evidence that digitising payments boosts transaction efficiency, reduces costs and drives financial inclusion. According to Elaine Weidman, Vice-President of CSR at Ericsson Group, DFS can be as much as 75% cheaper than traditional banking in low-income countries. The exponential growth of mobile phone subscriptions in Sub-Saharan Africa, from 90 million to 650 million over the last 8 years, offers considerable opportunities to grow the market for mobile financial services. However several barriers continue to limit this potential, including the lack of standardisation of products, the lack of interoperability between countries and technologies, and inappropriate regulations.
SADC Parliamentary Forum lobbies for creation of a regional legislature (StarAfrica)
Zim, SA, Moz to construct 550km interconnector (NewsDay)
West Africa's alarming growth industry - meth (Reuters)
Kenya-US direct flights set to lower freight cost by 20% (Business Daily)
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A Free Trade Area with unlimited liquidity
Since the launch of the Tripartite Free Trade Area in June this year, a voluminous body of scholarly work has been generated by many tertiary institutions and by international bodies like the UN Conference on Trade and Development.
It is noteworthy that much of the research is dedicated to analysing impediments to the intended free trade area and several reports delve deep into the many hurdles that must be overcome. It is equally noteworthy that not a single piece of serious research pays any attention the the announced Continental Free Trade Agreement.
The Tripartite Free Trade Area is the collaborative outcome of negotiations for which the basis was laid in 2008 when the members of three regional bodies, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC), agreed in principle to start a negotiation process with the ultimate aim to unite the three regions into a single common market.
Considering that it took seven years from the time the go-ahead was given to start the negotiations, to the time that a sufficient number of member states signed the Tripartite FTA, it is not unreasonable to suggest a similar length of time before any significant convergence starts to appear in the legislation and the regulations that will eventually control the trade between the many jurisdictions in the three regional blocks.
The authoritative Tralac Trade Law Centre based in South Africa has been compiling an impressive research resource for many years and was one of the first academic trade centres to list the numerous legal and political hurdles that must be overcome. Its website also provides the most up-to-date analysis of the progress in the first phase of negotiations which started after the FTA was announced.
Suffice to say that indeed, the obstacles are many and severe. Shortly after the launch in June it was apparent that the intention is noble but the means are limited.
The investments required to bring the infrastructure in the member states up to standard, are mind boggling, in fact so staggering that I have become numb to figures like $100 billion or even $10 trillion. I suppose I am still suffering from some form of aftershock, much like American policymakers and analysts after the 2008 crisis, when it became fashionable to talk of a trillion here and a trillion there.
These galactic amounts have forced me to reconsider my whole approach to regional development. Granted, the legal obstructions are serious and pervasive but at least it is widely recognised that harmonisation across all member states is required to make the FTA work. So, in the meantime legal experts have started working on this, and I suppose eventually, say twenty years from now, there will be sufficient legal convergence, to really talk about trade enablers.
But it is when I look at the capital we shall need, that I develop cold feet. The recent investment conference in Addis Ababa alluded to this reality when funding arrangements running into the hundreds of billions of dollars were discussed. Truly, these amounts are so big, it is difficult to get one’s mind around them. It is even more inconceivable how we are ever to going to be able to repay these loans despite the intended and anticipated explosion in trade.
But I believe the sheer size of the problems present many, as yet unrecognised, opportunities, one of which is the establishment of an independent currency, that is legal tender nowhere, but is allowed to act as the trade backbone for transactions, by all member states. There are so many facets to setting up and managing a currency like this, it will keep our best minds occupied for many years, but it will also solve many of the financial hurdles, especially forex constraints which we have not yet thought about.
Against the background of BRICS currencies all yearning to break the dollar yoke, an intra-African currency that is aligned with all BRICS currencies, will help considerably to increase liquidity. And since it will not belong to any individual state, it will be impossible to manipulate.
The FTA members can also learn much from the decade-long history of the Euro noting what must be avoided and what must be pursued. With a trade currency in place, many other opportunities arise for instance clearing houses and currency exchanges for local currencies, but also for the world’s major trade currencies. And since this will be only a transactional currency, there is no need to worry about counterfeiting because there will not be any actual paper money, it will all be digital.
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World Bank Board Committee authorizes release of revised draft Environmental and Social Framework
The World Bank is in the process of reviewing, updating and strengthening its environmental and social policies that serve to protect vulnerable people and the environment in World Bank investment projects.
On July 1, 2015, the Committee on Development Effectiveness (CODE) of the World Bank’s Board of Executive Directors authorized a third phase of consultations on a revised (second) draft of the proposed Environmental and Social Framework and requested the preparation of an accompanying document to outline certain issues that require further attention. The text of the entire revised framework, as well as the issue summary, was made publicly available on 4 August. Consultations will begin immediately.
The start of these consultations is the next stage of a long journey. There are a wide range of complex and significant issues still to be addressed and great diversity of views both on principle and on specific language. The challenge of reaching agreement across 188 countries is clear. In the end, the World Bank’s Board of Executive Directors will decide on the outcome of the review.
The consultation will continue in more than 30 countries. The first stop will be in Angola, where the World Bank will consult with the Ministers of Finance of African countries. After that, teams of seasoned World Bank safeguards specialists will consult with governments and other stakeholders until the end of the year.
“This revised draft is the result of a robust – in fact, an unprecedented – consultation with World Bank shareholders and stakeholders,” said Hartwig Schafer, World Bank Vice President for Operational Policy and Country Services. “The level of engagement and the caliber of feedback has been excellent, which shows in the revised draft. The proposed Environmental and Social Framework would substantially expand the scope of coverage from our current policy, and would help to ensure that project risk is managed more consistently and effectively.”
The proposed framework presents a risk- and impact-based approach to protecting the environment and people, and features a strong emphasis on risk management and achieving sustainable development outcomes over the life of projects; broadened social assessment and management of environmental and social risks; greater clarity of the roles and responsibilities of the World Bank and Borrower; increased harmonization with development partners and recognized good international practices; and renewed and strengthened partnerships with borrowers.
“We are well on our way to having ‘leading edge’ environmental and social standards that are clear, stronger and more comprehensive than our current safeguards, and that support our goals of ending poverty and promoting shared prosperity,” said Stefan Koeberle, Director of Operations Risk for the World Bank. “Our next generation of environmental and social protections will add strong new principles of non-discrimination, including children, disability, gender, age, and LGBT/SOGIE, and it will add – for the first time in World Bank history – detailed labor provisions to protect workers, including the rights to collective bargaining and freedom of association, strong grievance mechanisms, non-discrimination, occupational health and safety, and prohibiting child and forced labor.”
The proposal broadens the range of biodiversity concerns and adds provisions for the sustainable use of living natural resources (e.g., fisheries and forests). Climate change considerations have been added, including requirements to estimate and reduce greenhouse gas emissions in Bank-supported projects and to promote climate resilience. Assessments of social and environmental risk will be strengthened, ensuring resources are especially targeted to high risk projects. Finally, the draft framework includes Free, Prior, and Informed Consent (FPIC) for Indigenous Peoples, and requires increased and ongoing stakeholder engagement.
The proposed revision has evolved significantly from the first draft:
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The “alternative approach” clause for the applicability of the draft indigenous peoples’ standard has been deleted.
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The Free, Prior, Informed Consent (FPIC) provision, which was already a major step forward from the Bank’s prior position of Free, Prior, Informed Consultation, has been strengthened to require the World Bank to document that consent has been obtained. If this can’t be shown, the World Bank will not proceed with the aspects of the project relevant to Indigenous Peoples. These improvements provide for a new standard that is at the forefront of International Financial Institution (“IFI”) safeguard policies.
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The proposed labor standard has been substantially expanded to include the rights to freedom of association and collective bargaining. In addition, the scope of the proposed labor provision provides increased coverage for contractors, primary supply workers, and workers involved in community labor.
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On biodiversity, the revised draft introduces the concept of ecosystems, and clarifies that offsets, which are actions to compensate for unavoidable biodiversity impacts associated with economic development, should only be considered as a last resort, and proposes that in some instances offsets would be prohibited altogether.
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On land and involuntary resettlement, the second draft proposes to add an annex with detailed resettlement planning requirements, including for the production of baseline studies, and clarifies that compensation must always be paid before displacement. In addition, the revision also treats resettlement as a development opportunity, including benefit sharing for project-affected people, and a requirement to assess risks and impacts caused by land titling activities has been added.
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Human rights and the World Bank’s contribution to their realization are addressed in the draft framework’s Vision and through key provisions in the standards. The proposed framework emphasizes that the Bank shares the aspirations of the Universal Declaration of Human Rights and helps its clients to fulfill those aspirations. This approach is promoted in the design and implementation of the development projects the Bank supports.
At the request of Executive Directors, the third review phase will focus on implementing the framework in borrowing countries and on issues that require further discussion.
Consultations will also focus on the feasibility to implement the proposed provisions on the ground and on the potential impact of the proposed Framework on Borrowers. Throughout consultations, the Bank will work with Borrowers to identify any additional support needed to implement the proposed provisions.
The feedback received during consultations will inform the third draft Framework and the discussions of the World Bank’s Executive Directors as the reform of the safeguard policies proceeds.
A dedicated consultation web page provides a platform for shareholders and stakeholders to contribute to the discussion.
Background
The review of the World Bank’s safeguard policies began in 2012 with the goal to:
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Enhance protections for the poor and the environment through modernized standards;
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Provide inclusive access to development benefits through the introduction of a non-discrimination principle;
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Strengthen partnerships with borrowing countries through closer cooperation and increased use of borrower frameworks; and
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Strengthen the World Bank’s leadership through a modernized safeguards framework.
The review of the World Bank’s safeguard Policies includes three consultation periods. Two rounds of consultations have been completed (Phase 2 closed on March 1st).
This reform touches on complex development matters, including Human Rights, climate change, and a number of social issues. Consultations on the first draft Environmental and Social Framework showed a wide range of views among shareholder governments and civil society groups. When the Committee on Development Effectiveness (CODE) of the World Bank’s Board of Executive Directors discussed the second draft of the proposed Framework, consensus emerged on the overall architecture and some of the proposed provisions. However, many issues remained open. CODE authorized consultations in order to continue efforts to find solutions where views are divided. Executive Directors requested the preparation of an indicative list of outstanding issues to guide discussions throughout the consultation process.
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Digital solutions to steer financial inclusion in Africa
ICT can radically transform the market for financial products and services for poor Africans
The linkages between digital financial services (DFS) and the development agenda in Africa were discussed extensively during a panel discussion organized by the African Development Bank (AfDB) and the Making Finance Work for Africa (MFW4A) Secretariat, on the margins of the Third International Conference on Financing for Development (FfD3) in Addis Ababa. It was noted that technology-based products and services had not received enough attention within the international development community. Only four of the Sustainable Development Goals currently refer to ICT, yet the sector is considered by all participants as a major contributor to inclusive growth.
In his introductory remarks, Alexander de Croo, Minister of Development Cooperation, Digital Agenda, Telecom and Postal Services of Belgium, identified DFS as a key driver of the formalisation of African economies. Going further, the Executive Secretary of the African Capacity-Building Foundation (ACBF), Emanuel Nnadozie, noted how digital payments are central to domestic resource mobilization because they channel informal savings into the formal financial system.
There is growing evidence that digitising payments boosts transaction efficiency, reduces costs and drives financial inclusion. According to Elaine Weidman, Vice-President of CSR at Ericsson Group, DFS can be as much as 75% cheaper than traditional banking in low-income countries.
The exponential growth of mobile phone subscriptions in Sub-Saharan Africa, from 90 million to 650 million over the last 8 years, offers considerable opportunities to grow the market for mobile financial services. However several barriers continue to limit this potential, including the lack of standardisation of products, the lack of interoperability between countries and technologies, and inappropriate regulations.
In addition, the spread of mobile money services has not necessarily increased the use of financial services other than withdrawal and money transfer. In order to spur demand, mobile products and services should fit the specific needs of underserved populations. According to Danson Muchemi, CEO of JamboPay, an online payment gateway and an emerging player in the DFS market, one of the major challenges for the private sector is product relevance. “Mobile services providers have to focus on providing simple services available in the local language. This requires careful understanding of the diversified social networks underlying financial flows”, he noted. “The real competitor of digital financial services is cash”, added Henri Dommel, Manager of the Mobile Money Program at the UNCDF. DFS should therefore be as flexible and as easy to use as cash.
In addition to product creation and enhancement, AfDB’s Director of Financial Sector Development, Stefan Nalletamby, emphasized how innovation could support reliable data collection on creditors, helping to eliminate one of the main obstacles to credit for SMEs in Africa - information asymmetry.
The role of appropriate regulations to foster sound market competition emerged as key. Participants observed that both parliaments and governments at the national level had a crucial part to play in making financial regulations compatible with DFS development. Their participation will also ensure a conducive environment for historical players (banks) as well as new entrants (mobile service providers) to operate.
Additionally, African governments can be a major contributor to digital financial inclusion by building the trust of the populations in new payment networks. In this perspective, Nalletamby highlighted the importance of supporting government-to-person (G2P) payments. This approach has the potential to accelerate digital financial inclusion, as the government can dictate how it pays its recipients, thereby providing a benchmark for other types of payments.
From the point of view of development agencies and donors, supporting the digital finance agenda can have consequences across the board. A wide range of sectors will benefit from using flexible payment platforms (SMEs, clean energy providers…). In humanitarian crises, mobile social transfers can help bypass corrupt administrative chains to directly reach beneficiaries and improve their livelihoods, according to Dommel.
Successful strategies will require a multi-sectorial approach involving policy-makers, infrastructure providers, services and payment providers, and customers. Minister De Croo noted that in Middle-Income Countries, Official Development Assistance couldn’t be the only answer. “DFS should remain a commercial activity, financed by private investments”, he said. In commercially-viable regions, the role of development partners will be to eliminate barriers to private sector involvement.
In least-developed countries, development partners will need to compensate the absence of private players by directly financing DFS for the poor through Official Development Assistance flows or public-private partnerships.
In his closing remarks, Nalletamby underscored that mobile money and digital financial services were key pillars of financial inclusion, and one of the strategic priorities of the Bank in the next 10 years. The cross-cutting agenda of the Bank will encompass, among others, supporting national strategies to scale-up DFS markets, influencing policy-makers through increased dialogue, spearheading data collection on DFS market opportunities, and investing in incubators or funds whose focus is on mobile solutions. The Bank will also focus on providing liquidity to mobile banking and mobile service providers, partnering with local providers for financial skills development, and participating in programs promoting digital literacy of poor households.
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Environmental Goods Agreement trade talks eye August list
The chair of talks designed to liberalise environmental goods trade will compile and circulate a draft consensus list of products slated for tariff cuts in the coming weeks, trade sources confirmed at the close of a negotiating round held last week in Geneva, Switzerland.
Andrew Martin, Counsellor at the Australian mission to the WTO who chairs the talks in his personal capacity, will reportedly not use specific criteria to filter through some 650 plus goods currently tabled by the 17 WTO members participating in the plurilateral negotiations towards an Environmental Goods Agreement (EGA).
The chair will instead take a flexible approach and seek to list products that have gained most consensus in the negotiations to date. In addition, the chair may also include some products with strong environmental credibility, even where these have not gained comprehensive support. EGA participants will review the chairs’ consensus list during the next negotiating round scheduled for 14-18 September.
Since the talks formally launched in July last year, EGA participants have held five “discussion rounds” focused on the environmental credentials of potential goods to include in the deal, followed by three rounds geared towards reviewing product nominations put forward by most players since April.
July round
Negotiations during the latest EGA round held from 27-31 July continued to make good progress both in bilateral sessions and in plenary, according to trade sources, with the chair asking delegates to focus on product nominations where more clarity on support levels was required. A core group of products has already received backing from a wide range of participants during previous rounds.
Key areas of discussion last week subsequently included products related to cars and their parts, large-scale hydropower, bicycles, waste and scrap, as well as certain ceramics, plastics and fibres, trade sources said. Certain natural products also reportedly surfaced as potentially tricky items, with some participants questioning the environmental credibility around the nomination of certain wood and bamboo products.
Bamboo is part of a list of 54 goods targeted for tariff reductions to five percent or less by the end of this year by the 21-nation Asia Pacific Economic Cooperation (APEC) alliance. According to APEC, renewable bamboo-based products may be substituted for other wooden necessities, and are more environmentally-friendly due to a short growing cycle.
At the talks’ launch last July EGA participants had signalled plans to build on the APEC list of environmental goods. However, although several sources have reported that the full APEC list is likely to be included in the EGA, others have explained that the shape of the final deal is not yet fully clear at this stage.
Thirteen EGA participants are also members of APEC, with exceptions including the EU, Costa Rica, Norway, and Switzerland. The APEC environmental goods commitment targets applied tariffs, however, while a number of experts have suggested the EGA could lower bound tariffs and go for a full elimination. Applied tariffs are the actual duty a country levies on goods at the border, while bound tariffs represent the maximum duty ceiling levels WTO members can potentially set.
Some sources have suggested the final EGA list could target 200 or so products in addition to the APEC 54 list. Ballpark estimates for the chair’s August consensus list, however, were not divulged by sources at the time of reporting.
Goods on the table, ITA overlap
Goods nominated so far by EGA participants include products relating to cleaner and renewable energy, energy efficiency, air pollution control, environmental monitoring and analysis, as well as solid and hazardous waste management, among others.
However, several EGA participants have nominated the same tariff line under the World Customs Organization’s Harmonised System (HS) subheadings but attached different descriptions pertaining to specific products or product groups captured only by national tariff codes, known in trade jargon as “ex-outs.” In some instances different environmental justifications have also been attached to similar nominations.
EGA participants have been engaged in bilateral work and efforts with customs officials over the last few months to clarify these areas. The chair reportedly urged all participants at the close of the July round to refine these nominations over August.
China and Costa Rica are the only players not to have tabled a finalised list of nominations to date, trade sources have confirmed, due to mandate reasons. Beijing will reportedly receive a full mandate for the EGA negotiations around September and has already put forward indicative product nominations.
Meanwhile, a separate plurilateral trillion dollar deal to expand the WTO’s Information Technology Agreement (ITA) was struck in mid-July, just ahead of the latest EGA round. Some sources have said that there is an overlap of around 50 products between the EGA nominations universe and the ITA expansion. Trade negotiators will therefore likely need to consider how to manage consistency between the two talks moving forward including, for example, on timing for tariff cuts.
The ITA expansion experience, however, has raised some concerns among trade watchers over the fate of the EGA talks. Originally finalised in 1996, efforts to expand the former’s coverage in the face of rapid technological advancements were stymied last year after China and South Korea came to a stalemate over the inclusion of several items such as liquid-crystal displays (LCDs), with Seoul arguing for their inclusion.
Some observers have mooted concerns that Beijing may again prove difficult to work with in the EGA context, although other sources have said that the Asian giant has engaged positively so far. The ITA dynamics have, however, led a number of stakeholders to push for the inclusion of a review mechanism in the EGA’s core framework to avoid lengthy re-negotiations in the face of new technologies.
Draft declaration
The latest round also saw the 28-nation EU bloc – counted as one participant in these talks – distribute a draft ministerial declaration for the eventual adoption of the EGA deal.
The EU’s draft text includes several sections outlining the deal’s structure, coverage, timing in brackets, and institutional arrangements, trade sources said. The EU would see tariffs eliminated on all goods listed by January 2017 with no staging envisioned.
Efforts would also be made, under the EU’s vision, to liberalise trade on certain environmental services relating to cross-border supply and consumption abroad by January 2022. EGA participants would also undertake some consultations on the possibility of liberalising certain environmental services related to the temporary movement of workers.
Sources said that the EU envisages the establishment of a committee to help manage future work on services as well as areas such as non-tariff barriers (NTBs) to environmental goods trade. A number of stakeholders have said that NTBs can act as a significant brake on green goods commerce.
The committee would work to regularly review the list of environmental goods annexed to the EGA deal starting from January 2018.
According to sources, the EU’s draft text would also include language recognising the role of environmental goods trade for environmental protection, the fight against climate change, and green growth, as well as recognising the deal’s contribution to the UN Framework Convention on Climate Change (UNFCCC) and other multilateral environmental agreements.
EGA participants have previously signalled that the negotiations could make a “significant contribution” to the UN climate talks. Nearly 200 nations are hoping to ink a new, universal emissions-cutting deal to come into effect at the end of the decade during a meeting scheduled for 30 November to 11 December in Paris, France.
Several officials have suggested aims to hammer out key points of the EGA deal in time for the WTO’s tenth ministerial conference (MC10) to be held in Nairobi, Kenya from 15-18 December, back-to-back with the UNFCCC meet.
A number of delegates last week did raise technical questions on the scope of the EU’s draft text. Brussels has reportedly offered all EGA members the opportunity for bilateral consultations before the next round to further discuss its proposal.
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Nigeria to lose billions without oil sales reforms, report says
Nigeria must urgently reform the way it sells oil to prevent Africa’s biggest crude producer losing billions of dollars of revenue, according to a new report.
The approach of the national oil company, Nigerian National Petroleum Corp., “suffers from high corruption risks and fails to maximize returns for the nation,” the New York-based National Resource Governance Institute said in a 73-page report published on Tuesday.
The NNPC should end the practice of allocating about 445,000 barrels of oil a day to Nigeria’s four domestic refineries, which process less than a quarter of that total. The allocation has become the “main nexus of waste and revenue loss from NNPC oil sales,” according to the report.
Nigeria’s President Muhammadu Buhari said last month the U.S. will help trace and recover funds from the sale of about 250,000 barrels of oil that are stolen each day in the country. The oil industry, which contributes about two-thirds of government revenue, has come under pressure as the price of crude slumped 50 percent over the past year.
The National Resource Governance Institute said it sent couriered letters, faxes and e-mails to the NNPC and several of its subsidiaries, informing them of the report and asking detailed questions. The NNPC and its units didn’t respond, according to the non-governmental organization, which co-authored a report last year on the scale of African crude purchases by Swiss oil traders.
Revenue System
Calls to the mobile phone of NNPC spokesman Ohi Alegbe didn’t connect, and he didn’t immediately respond to an e-mail seeking comment.
The NNPC should be bound by a revenue-collection system that allows predictable financing for oil projects and reins in discretionary spending from sales, the report said. Nigeria’s former central bank governor Lamido Sanusi said in 2014 that as much as $20 billion in NNPC oil revenue had gone missing.
The report calls for changes to the practice of swapping refined products for crude oil, including the elimination of complex offshore processing agreements that are “open to abuse.” Nigeria may have lost as much as $381 million, or $16.09 a barrel, from one such agreement in a single year, the report said.
Buhari, who pledged during his election campaign to clamp down on graft, dissolved the board of the NNPC in June.
Nigeria is one of the world’s only major oil producers that sells most of its crude to traders rather than end users, according to the report, which recommends the NNPC stops selling to small, unqualified “briefcase companies.” These firms “pose especially high governance risks” as they could help oil buyers avoid taxes and channel payments through politically exposed persons, the report said.
“Nigeria can no longer afford to leave the NNPC’s dysfunctional and costly oil sales system as it is,” the report said, as the status quo is “characterized by convoluted, under-policed deals with weak commercial justifications.”
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The role of big data in Africa’s regional integration
The ambitions of a young Ugandan entrepreneur to expand his coffee processing business will soon be within reach. East Africa’s accelerated integration process is opening up possibilities that were unthinkable not long ago. In a couple of years he may be able to tap into West Africa’s 350 million people without having to pay the high tariffs and transport costs that currently make it easier to export to Europe than to other parts of the continent.
Initiatives to accelerate the speed of Africa’s regional integration are gaining momentum. They include the establishment of a Continental Free Trade Area by 2017, an action plan to boost intra-African trade and the dismantling of trade barriers through establishment of sub-regional free trade areas and customs unions. Measures to simplify customs procedures, the free movement of people and the development of regional infrastructure are also being put in place. The spirit of the 1991 Abuja Treaty, which has served as the blueprint for such an ambitious goal, is finally being taken seriously.
With trade pegged as a means to implement the post-2015 development agenda, as well as Africa’s own Agenda 2063, the role of trade as a vehicle for development has become more obvious.
Formal and informal trade
On average, formal intra-African trade accounts for about 14% of total African trade. This is low compared to other regions. Intra-regional trade as a share of trade is 17% in South and Central America, 42 % in North America, 62% in the European Union and 64% in Asia. Key to such a figure is the word ‘formal.’ A significant portion of economic exchanges taking place along various African borders are informal.
The good news, though, is that manufactured products represent about 46% of intra-African formal trade. This indicates the huge potential for the development of supply chains across the continent.
Africa’s predominately monocultural economic base can be changed by adding value to goods produced on the continent. Along with productivity gains and a boost in competiveness, enough jobs can be created for the continent’s young and rapidly urbanizing population.
In perhaps the boldest attempt to date to collect data on the impact of regional integration, the Economic Commission for Africa (ECA), the African Union and the African Development Bank have jointly developed a Regional Integration Index. The tool will be a barometer for governments and the general public, enabling them to check the performance of countries and their regional economic communities.
Summarizing information from more than 70 indicators, the index tracks progress and identifies bottlenecks to be addressed, informs policy decisions and helps with future trade negotiations. In support of its implementation, the ECA is training countries and sub-regional entities in Africa on data collection and supervision.
From flight data to tariff data
Given the novelty of some of the indicators being used, efforts are also being made to standardize databases. The use of ‘big data’ techniques has offered opportunities for the index to be a frontrunner of innovative methodologies. For instance, collection of airline data to provide datasets on flight patterns between airports is used to calculate an aggregate of intra-African flights; or trade tariff data is employed to calculate averages of trade-weighted intra-African tariffs.
In light of the advances made in the telecommunications industry, there is potential to leapfrog technology and leverage sources of big data generated from online content, social media or satellites to mobile-phone technology to support refined policy choices. With more than 629 million mobile-phone users, phone data is proving to be a gold mine for decision-makers. This data is already making a difference in numerous areas, from humanitarian assistance to tracking the transmission of diseases and helping compensate farmers in real time for weather-related crop failures. Africa’s mobile banking systems have not only changed the way financial transactions are carried out on the continent, but are becoming a reference for the rest of the world.
Notwithstanding these successes, further investments are required to take full advantage of big data’s potential. Data-user communities are being designed that will help validate data entries generated by others rather than from official statistical entities. Being able to update the Regional Integration Index with big data will encourage the type of scrutiny and accountability that can catalyse greater government action.
With data enablers in place, entrepreneurs will be able to assess which markets are worth plugging into. This will be as crucial for the young Ugandan waiting to export coffee as it will be for the Malian business thriving on cotton production or the assemblers of BMW automobiles in South Africa. Making the right decisions can only be accomplished through having the right knowledge.
This article was originally published in the International Trade Forum Magazine in July 2015.