Search News Results
SADC, EU inch closer to ratifying EPA agreement
The European Union (EU) and Southern African Development Community (SADC) are on the verge of finalising the signing of an Economic Partnership Agreement (EPA).
Negotiations for the EPA between the EU and SADC were concluded last year.
At a recent meeting held between Botswana’s Trade Minister, Vincent Seretse who is also Coordinator of the SADC EPA Group, and his counterpart in the European Union, Commissioner for Trade Cecilia Malmstrom, the two parties recognised the vast amount of work done thus far.
The SADC EPA group consists of seven SADC member states out of the 15. These are the five Southern Africa Customs Union (SACU) member states Botswana, Namibia, Swaziland, Lesotho and South Africa, plus Angola and Mozambique.
In a statement, the Trade Ministry recently noted that both Minister Seretse and the EU Commissioner have reiterated their full commitment to conclusion of the process leading to the signing, ratification, and enforcing the EPA.
Also on the agenda was the conclusion of the processes towards the signing and ratification of the SADC-EU Economic Partnership Agreement, the upcoming World Trade Organisation 10th Ministerial Conference in Nairobi, Kenya, and other trade issues of mutual interest to the two parties, according to the ministry.
Commissioner Malmstrom did mention that the EU has set aside funds to assist SADC states in implementing the EPA upon its coming into effect.
Malmstrom also indicated that Botswana was eligible to benefit to the tune of Euro 2.6million and urged the country to come up with proposals to motivate for the release of the funding.
The two officials further indicated their sincere hope and commitment that the Nairobi Conference will come up with meaningful outcomes relating to the post-Bali work programme of the remaining Doha Development Agenda issues (inter alia on agriculture) in the form of a political decision which will allow the technical negotiators to come up with agreements thereafter.
Minister Seretse indicated to his counterpart that Botswana had, as recently as last week, ratified the WTO Agreement on Trade Facilitation (ATF).
Commissioner Malmstrom indicated that the internal EU processes leading to ratification of the WTO ATF were at an advanced state in all EU member states and they hope to have concluded them by the time of the 10th Ministerial Conference in Nairobi at the end of this year.
With regards to technical and other assistance for developing and least-developed countries in relation to the implementation of the WTO ATF, Commissioner Malmstrom stated that the EU had set aside the sum of Euro 400 million to assist.
The parties made an in-principle agreement that when the time for signing comes, Botswana will be considered as the preferred host for the ceremony.
SADC member states who are part to the EPA are strong in the export of diamonds and South Africa, Botswana, Lesotho and Namibia’s large share of exports are to the EU.
Other products from the region include agricultural products (beef from Botswana, fish from Namibia and sugar from Swaziland), oil from Angola and aluminium from Mozambique.
South Africa’s exports to the EU are much diversified and range from fruits to platinum and from manufactured goods to wine.
The EU exports a wide range of goods to the SADC EPA countries, including vehicles, machinery, electrical equipment, pharmaceuticals and processed food.
The SADC member states who are party to the EPA are a diverse group with Lesotho and Mozambique considered the least developed countries (LDCs), while countries like Namibia and Botswana are given the upper middle income status.
Related News
tralac’s Daily News selection: 17 July 2015
The OECD's Economic Survey of South Africa 2015 launches today: Preview, Government's response
Intra-African trade – an analysis (tralac)
This paper clearly reinforces the data warning outlining the dangers inherent in trying to analyse intra-African trade data. The use of mirror data, late and non-reporting and ‘vanishing’ trade has been the bane of this research; we must therefore emphasise that this paper is far from being a definitive analysis of intra-African trade. We must also emphasise, however, that the ITC is the best available source of consistent trade data and this paper represents a systematic attempt to use the available data to start shedding light on intra-African trade.
Over the last few years the aggregate intra-African trade’s (imports and exports) share of total African trade has consistently been around the 12% mark (with a high of 14% in 2009) as shares from both the European Union (EU) and the United States (US) are dramatically declining in the face of increasing Brazil, Russia, India and China (BRIC) trade. [The author: Ron Sandrey]
Global value chains: the missing link in Sub-Saharan Africa’s trade integration (AFD)
Our analysis finds that increased trade integration has had a strong influence on growth in sub-Saharan Africa. Average real GDP per capita growth increased from 2.9 percent in the 1990s, to 4.3 percent in the 2000s. Of that 1.4 percentage point increase, about half was accounted for by higher trade integration. [The author: Roger Nord]
Obama to announce key initiatives in Kenya, Robinson Githae says (Daily Nation)
President Barack Obama is set to announce major new agreements with Kenya, the country’s ambassador to the United States, Robinson Githae, said on Thursday. The agreements are on military assistance, trade and investment and other subjects, Mr Githae said.
AGOA: Next steps
With the African Growth and Opportunity Act set in place for another decade, the Administration is asking African countries to begin thinking about what will come next – including free trade agreements, a US trade official said yesterday. When US Trade Representative Michael Froman attends the annual AGOA forum next month in Gabon, he intends to get the discussion started on preparing to move away from unilateral preferences to reciprocal trade, Deputy Assistant US Trade Representative Constance Hamilton said. Part of that discussion will focus on which African countries or regional groupings would be ready to engage in FTA negotiations with the United States, the USTR official told a program on the next steps for AGOA hosted by Rep. Karen Bass (D-Calif).
AGOA: US government submits waiver request to WTO's Council for Trade in Goods (WTO)
Pursuant to Article IX:3 of the WTO Agreement, the United States requests a waiver of its obligations under paragraph 1 of Article I and paragraphs 1 and 2 of Article XIII of the GATT 1994 through September 30, 2025, to the extent necessary to permit it to provide duty-free treatment under the AGOA to eligible products originating in beneficiary countries. The United States requests the Council for Trade in Goods to give this application for a waiver expeditious and favourable consideration. In the meantime, the United States will promptly enter into consultations, on request, with any interested Member with respect to any difficulty that may arise as a result of the preferential treatment provided under the AGOA.
Circumstances justifying the waiver: Because of the severe and pressing development challenges facing sub-Saharan Africa, these policy objectives cannot be fully achieved through measures consistent with U.S. obligations under GATT 1994. More than 400 million people in sub-Saharan Africa live on less than $1.25 a day, and regional GNI per capita was less than $1,700 in 2013. Average annual GDP growth in the region was 4.1 percent in 2013.
Portugal was the 3rd largest investor in Mozambique during the 1st quarter (Club of Mozambique)
The list for the first quarter, totalling US$500m is led by Spain and China, although together they account for only eight projects, compared to 22 for Portugal, which remains the main foreign job creator, with 28 jobs per US$1 million invested versus an average of 13 for all other countries. Most Portuguese investment (45.5%) was applied in the industrial sector, followed by services (30%) and insurance (14.5%), and concentrated in the South, in the provinces of Maputo and the city of Maputo.
IGC Mozambique Growth Week 2015: some presentations now posted (IGC)
Zimbabwe: French firm to start import testing exercise (The Herald)
French-based standards firm, Bureau Veritas, will begin testing imported products for acceptable standards at the end of this month after the initiative failed to start in May this year. The Consignment Based Conformity Assessment was initially scheduled to start on May 16 2015, with all products regulated by the Ministry of Industry and Commerce of Zimbabwe exported into Zimbabwe having to be accompanied by a CBCA certificate. But Industry and Commerce Minister Mike Bimha said yesterday enforcement of the Consignment Based Conformity Assessment exercise would now commence on the 27th of this month and the initial phase of the CBCA would run for six months.
The next and full implementation phase of the standards verification process for all imported goods will commence on November 1, 2015 after the transitional phase period to end of October and thereafter run for four years, Minister Bimha said. Minister Bimha said the exercise had been delayed to allow incorporation and considerations regarding issues to do with pricing or rates levied to importers for their goods and some technical issues that the minister would not discuss yesterday.
From evidence to policy: innovations in shaping reforms in Africa (World Bank)
This four-day learning event, to be held in Cape Town, will bring together policymakers, academics, civil society representatives, and development partners to discuss innovations in the use of evidence to inform policy design in Africa. The event will feature a 2-day conference (July 21-22) and a 2-day training (July 23-24). [Programme]
Data and debates: launch of SmartGov Africa (Democracy in Africa)
This month, SmartGov Technologies Ltd, the Cambridge (UK) based data lab, announced the launch of the SmartGov Africa project. SG Africa was designed to aggregate, geo-reference and enable discussion on all African public data. It is now the largest single pan-African data portal, with 1.2m data-points already available, across 54 African countries. The platform is open for anyone to use.
Financing for Development conference: selected updates
Financing for Development forges ‘New Financial Alliance’ (UN)
DESA briefing note on the Addis Ababa Action Agenda (UN)
Pressure on governments, critical in probing Africa’s stolen funds (UNECA)
Reshaping finance for sustainability: a moment in time (UNEP)
Blended Finance Vol. 1: a primer for development finance and philanthropic funders (WEF)
Financing for Development: US government development priorities
FY16 State and Foreign Operations Appropriations (CGD)
Enlisting the media in regional competition regime (COMESA)
Business writers from select COMESA Member States are meeting in Livingstone, Zambia for the regional sensitization forum on trade competition regime in the region. Immediate former Principal Judge of the COMESA Court of Justice Prof. Samuel Rugege who presented a keynote address said 42 cases has been filed in the Court since its establishment in 1994. He attributed the low number to parties resorting to other dispute resolution mechanism and lack of awareness about the Court's operations.
Reviewing the security situation in the East Africa region: heads of intelligence and security services (African Union)
SEAC workshop on the revision of the SADC Principles and Guidelines Governing Democratic Elections (SADC)
SADC-COMESA-EAC Climate Change YEAR BOOK 2015: EOI (SADC)
PRARI Second Stakeholder Meeting for SADC: update, project www
Transport emission mapping and monitoring and capacity building in 5 selected African cities (AfDB)
The AfDB wishes to recruit a consultant to carry out a pilot project in 5 Selected Cities based on regional diversification and ongoing/proposed transport projects namely; Abidjan, Rabat, Yaounde, Dar es Salaam and Lusaka to build capacity in concerned government agencies in transport emission monitoring, raise awareness of options for financing low emission transport and facilitate the quantification of the wider benefits of low emission transport.
China launches first World Bank trust fund (World Bank)
President Kim and Finance Minister Lou Jiwei signed an agreement to establish a $50 million fund to help reduce poverty. The World Bank President also met with leaders of the Multilateral Interim Secretariat for Establishing the Asia Infrastructure Investment Bank (AIIB) to discuss closer collaboration. These initiatives reinforce the growing partnership with China, which already is the Bank’s third-largest shareholder and an important contributor to IDA, the institution’s fund for the poorest, as well as the Global Infrastructure Facility.
The impact of IMF-supported programs on FDI in low-income countries (IMF)
It is common for IMF-supported adjustment programs with low-income member countries (LICs) to project that they will facilitate FDI inflows. The main objective of this paper is to empirically examine this hypothesis. Using an unbalanced panel dataset for 73 low-income countries over the period 1980–2012, and two different econometric methods that address the selection-bias problem, the empirical results robustly show that participating in IMF-supported program is associated with a significant increase in FDI inflows.
Featured infographic: the radical US cargo shift to the East Coast
Expatriates make huge gains from weakening shilling weakens (Business Daily)
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 16 July 2015
The selection: Wednesday, 15 July 2015
Related News
UN officials hail outcome of conference on development financing as first milestone of 2015
Secretary-General Ban Ki-moon and senior United Nations officials on Thursday hailed the outcome of the financing for development conference in Addis Ababa as the first milestone in a critical year in which major decisions are also expected on the future sustainable development agenda and on climate change.
“The Addis Ababa Action Agenda is a major step forward in building a world of prosperity and dignity for all,” Mr. Ban said in a statement, adding that it revitalizes the global partnership for development and establishes a strong foundation for implementation of the future development agenda.
The Action Agenda, adopted at the conclusion of the Third International Conference on Financing for Development, contains a series of bold measures to overhaul global finance practices and generate investments for tackling a range of economic, social and environmental challenges.
Building on the outcomes of previous conferences held in Monterrey, Mexico, and in Doha, Qatar, the document addresses all sources of finance, and covers cooperation on a range of issues including technology, science, innovation, trade and capacity building.
Mr. Ban noted that the Addis conference was the first of three milestones this year. “Member States have now passed this first hurdle. Now we must work ever harder for a successful summit on sustainable development in September in New York and for a meaningful agreement on climate change in December in Paris.”
Wu Hongbo, Under-Secretary-General for Economic and Social Affairs and Secretary-General of the Conference, highlighted the fact that the Action Agenda features a comprehensive set of policy actions with a package of over 100 concrete measures and some concrete deliverables.
“The Addis Ababa Action Agenda testifies to our collective resolve to build a better future for all in a more equal and sustainable world,” said General Assembly president Sam Kutessa in his statement to the Conference’s closing plenary, in which he spotlighted the agreed concrete deliverables, policies and actions to support the implementation of the post-2015 development agenda.
With the international community now having “embarked on a momentous journey in a common pursuit to eradicate poverty, improve livelihoods for all and protect our planet,” he called on all delegations to fully implement the Action Agenda.
“With this successful outcome, we have a strong basis to build upon and continue our path towards historic Summits in New York in September and Paris in December. I count on your continued commitment to ensure an ambitious outcome for the post-2015 development agenda,” he said.
“The Action Agenda provides a global framework for financing sustainable development and developing sustainable finance. This new framework aligns all financing flows and policies with economic, social and environmental priorities.”
Also delivering a statement at the closing plenary, Letty Chiwara, UN Women Representative to Ethiopia, the African Union and the UN Economic Commission for Africa (UNECA), said that, along with other aims, the Action Agenda reaffirms that achieving gender equality, empowering all women and girls, and the full realization of their human rights are essential to achieving sustained, inclusive, and equitable economic growth and sustainable development.
Delivering a statement on behalf of UN Women Executive Director Phumzile Mlambo-Ngcuka, she said that to date, no country in the world has closed the gender gap. The chronic and persistent under-investment in critical areas for women and girls, such as economic empowerment including reducing and redistributing women’s unpaid care and domestic work; sexual and reproductive health and rights; violence against women and girls, women, peace and security; and participation and leadership, has hindered the realization of gender equality and the empowerment of women and girls.
”New and existing commitments on gender equality require unprecedented and transformative financing, in scale, scope, ambition and quality, from all sources and at all levels,” she said, calling on all Member States to endorse and implement the Addis Ababa Action Plan on Transformative Financing for Gender Equality and Women’s Empowerment and to give the next generation of development goals the financial impetus necessary to achieve gender equality and to empower all women and girls.
Among the new initiatives agreed by Member States is the establishment of a Technology Facilitation Mechanism at the summit to be held in September in New York to boost collaboration among various actors to support the Sustainable Development Goals.
In addition, countries agreed to establish a Global Infrastructure Forum to identify and address infrastructure gaps, highlight opportunities for investment and cooperation, and work to ensure that projects are environmentally, socially and economically sustainable.
They also decided to strengthen the financing for development follow-up process to ensure that no country is left behind, including by establishing an annual financing for development forum and an inter-agency task force which will report annually on progress in implementing the FFD outcomes.
In the Action Agenda, countries also recommitted to achieving the target of 0.7 per cent of gross national income for official development assistance (ODA), and 0.15 to 0.20 per cent for least developed countries.
“We are really, really pleased with the outcome,” said Amina Mohammed, the Secretary-General's Special Adviser on Post-2015 Development Planning, welcoming in particular the decision on ODA. “A few years after the financial crisis, when we began this conversation, there was very little appetite for a discussion on 0.7 but today we have a recommitment to it.”
The recommitment on ODA was also welcomed by Gyan Chandra Acharya, High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.
“There is a very clear forward-looking commitment coming from the Addis Ababa Action Agenda. It talks about, with a timeline, implementation of 0.2 per cent of GNI going to the LDCs,” Mr. Acharya said. “It was there before but it was more aspirational. But now it is coming with a very strong commitment to implement it.”
The Action Agenda also calls for strengthening support for the work of the UN Committee of Experts on International Cooperation in Tax Matters to improve its effectiveness and operational capacity, and the engagement with the Economic and Social Council.
On climate change, the outcome calls on developed countries to implement their commitment to a goal of jointly mobilizing $100 billion per year by 2020 from a wide variety of sources to address the needs of developing countries. Countries also committed to phase out inefficient fossil fuel subsidies that lead to wasteful consumption.
Related News
International Monetary Fund boosts efforts to help countries finance development
As countries meet in Addis Ababa to consider ways to ensure adequate financing for sustainable development, the International Monetary Fund (IMF) is taking measures to boost access to its resources, help countries better mobilize domestic revenue and focus more of its own work on issues such as equity, inclusion and the environment.
The measures are intended to better support countries in their pursuit of the set of Sustainable Development Goals (SDGs), which world leaders are expected to adopt in New York in September and which focus on ending poverty, transforming lives and protecting the planet.
The Deputy Director of the IMF’s Strategic Policy and Review Department, Sean Nolan, said that ahead of the Third International Conference on Financing for Development, the Fund took a look at its operations “through the lens of FFD” to see how it could improve its work.
It has decided to expand access to all of its concessional facilities by 50 per cent, which means making more money available for eligible low-income countries. “Working the numbers, we felt we could lend more to lower-income countries,” Mr. Nolan said in an interview with the UN News Service.
In addition to this, the Fund set the interest rate at zero for all loans extended under the Rapid Credit Facility, which is targeted at countries hit by natural disasters and fragile/post-conflict States.
Another way for the Fund to “deliver more value,” Mr. Nolan said, is increased policy advice, technical assistance and capacity building to help countries boost economic resilience. This includes doing more to assist countries with domestic resource mobilization, or tax collection, a critical source of revenue for governments.
“There’s only so much amount of aid countries can rely on. Indeed, often you can’t rely on aid in the sense of relying on certain amounts every single year… it goes up, it goes down… governments fall in and out of love with the donors… so it’s not so reliable,” said Mr. Nolan.
“At the end of the day, a State operates on the basis of its own revenue collection. And a developmentally-oriented State, a State that actually wants to promote development through infrastructure, health, education spending, needs to raise most of the money itself.”
He added that raising revenue does not necessarily mean going into the rural areas and heavily taxing people. “It actually means taxing the better off in the society and also taxing companies, both domestic and foreign, more effectively.”
Tax rates, he noted, are very low in many low-income countries, in some cases under 15 per cent of gross domestic product (GDP). This could easily be increased by a series of reforms, as well as by better structuring of taxation in the extractive industries and greater attention to the transfer of money out of the country.
This includes the profits of companies that are being transferred abroad. “If they’re legal transfers, that’s fine. But if the tax code is weak or inadequate, then the country is losing revenue to foreign companies. They should be doing a better job of capturing it.”
Ahead of the Addis Ababa Conference, the IMF and the World Bank launched a new initiative to help developing countries strengthen their tax systems, with the belief that raising additional revenues will help these countries to fill financing gaps and to promote development.
Among the other sustainable development-related issues the Fund intends to focus more on are energy pricing, environmental tax issues and carbon pricing schemes, as well as helping countries build up their infrastructure.
Headquartered in Washington, D.C. and comprised of 188 countries, the IMF’s mission is to ensure the stability of the international monetary system in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members.
Related News
Pressure on governments, critical in probing Africa’s stolen funds
“Many of our governments will only act on this [problem of illicit financial flows] if there is pressure from the people,” said a much applauded Chairman of the High Level Panel on Illicit Financial Flows (IFFs) from Africa, in a well attended side event of the third International Conference on Financing for Development (FFD3).
The discussion moderated the Deputy Executive Secretary for Knowledge Generation of the United Nation’s Economic Commission for Africa (ECA) Mr Abdalla Hamdok, grouped eminent discussants invited to reflect on practical ways for the continent to implement the recommendations of the Mbeki-led Panel’s report titled ‘Track it! Stop it! Get it!’ The report that was officially presented to the 8th Joint AUC-ECA Conference of Ministers of Finance, Planning and Economic Development, last March in the Ethiopian capital. It blames Africa’s loss of over US$50 billion per year since 2010, to IFFs via shady business transactions including kickbacks and other forms of abusive of public office, criminal activity such as drug and money trafficking and money laundering, as well as tax evasion, the distortion of money transfer charges and over-billing (especially by transnational firms).
“We can only get cooperation [from States in tackling IFFs] under duress,” said ECA’s Executive Secretary of ECA Mr Carlos Lopes, in consonance with Mr Mbeki’s earlier remarks at the FFD3 side event. “In the case of Africa, all the discussions about domestic resource mobilisation are tied up to the way we deal with this phenomenon,” Mr Lopes went on, while noting the critical role that civil society, the media and politicians, especially parliamentarians, have to play in keeping the pressure up.
“If you stop the bleeding, you can start healing and move on to other things,” reckoned the African Union Commission’s Chairperson, Mr Erastus Mwencha, who added that the IFF report should be a strong part of the Financing for Development agenda and must get the support of governments, private sector and international community working together.
Representing the governments of Norway and Sweden that have highly contributed to the efforts to stem IFFs from Africa, were Mr Bjørn Brede Hansen and Ms Charlotte Gornitzka, respectively. They reaffirmed their countries’ commitment to working with Africa to tackle IFFs. Norway, for instance would no longer allow room for the creation of anonymous bank accounts while Sweden will keep engaging with Africa’s stakeholders through capacity building.
Such capacity building happens to be one of the most important crosscutting issue from the High Level Panel’s findings on the field, according to the Executive Secretary of the African Capacity Building Foundation, Mr Emmanuel Nnadozie, who worked closely with the Mbeki-team at the time he served the ECA.
Civil Society Organisations used the occasion to praise ECA and its partners for their unprecedented move to involve them in the important issue of IFFs.
The other key speakers during the discussion were: Zambia’s Minister of Finance Zambia – Mr Alexander Chikwanda, the Acting Chief Economist and Vice-President at the African Development Bank – Mr Steve Kayizzi-Mugerwa and the Co-Founder of Third World Network (a partner organisation of the ‘Stop the Bleeding’ Africa campaign) – Mr Yao Graham.
“Stop the bleeding” campaign
The side event was jointly convened by ECA and African Civil Society Networks that joined the fight against IFFs with a campaign launched in June 2015 in Nairobi, Kenya. It is made up of: the Tax Justice Network-Africa, Third World Network-Africa, Africa Forum and Network on Debt and Development (AFRODAD), the African Women’s Development and Communication Network (FEMNET), the African Regional Organisation of the International Trade Union Confederation (ITUC-Africa) and Trust Africa, supported and joined by the Global Alliance for Tax Justice.
The Network came in handy with a pledge to which the panellists and other key figures signed. Here is the content off the pledge:
Illicit Financial Flows (IFFs) from Africa are directly damaging Africa’s development prospects. It is time to stop them.
The ‘Stop the Bleeding’ campaign supports the findings and recommendations of the AU/ECA high Level Panel Report on Illicit Financial Flow from Africa.
This call is for Regional and International action to do the same in order to stop Illicit Financial Flows from Africa.
The aim of the “Stop the Bleeding Campaign” is to curb Illicit Financial Flows (IFFs) from Africa. To achieve this, the campaign sets out:
-
to deepen knowledge on IFFs through research and to share information widely on how such illicit flows affect African economies
-
to mobilize a broad base of supporters who take action to build more awareness of IFFs through a popular initiative, called the “One Million Voices” petition, aimed at mobilising citizen action and support against the bleeding of African economies from IFFs
-
to enlist eminent persons who amplify the voices saying “STOP THE BLEEDING” in order to curb illicit financial flows from Africa
-
to build the momentum for citizen and policy action via powerful grassroots networks and also strategic partnerships for a popular outcry and a big noise calling on African leaders to take action to curb IFFs.
-
to advocate to African leaders themselves, and through them to the international community and the corporate entities behind IFFs, so that they find lasting solutions to the IFF problem and all its related issues.
Related News
UNCTAD Investment Policy Framework 2015 launched at Financing for Development Conference
Ministers met with UNCTAD Secretary General Kituyi at the official UNCTAD side event to the Financing for Development (FfD) conference. There Dr. Kituyi launched the newly updated and expanded UNCTAD Investment Policy Framework that outlines a new generation of investment policies that put sustainable development issues at their core.
The High Level session addressed the challenge of financing the Sustainable Development Goals (SDGs), including how to mobilize investment, how to channel it towards the SDGs and how to maximize the benefits and minimize the risks. According to UNCTAD’s 2014 World Investment Report, achieving the SDGs will require a significant ratcheting up of investment.
The private sector will need to be a vital partner to public efforts to reach the scale of investment required. Recent years have seen a tectonic shift of foreign direct investment (FDI) going to developing countries, but most of this investment is not reaching the poorest economies.
Ministers and other high-level participants deliberated on the question of what policy strategies and actions can be developed to better target investment to finance development.
In this context, Secretary General Kituyi announced the update of UNCTAD’s Investment Framework. The updated Investment Framework seeks to address a comprehensive group of policy areas that collectively impact a country's ability to attract and benefit from FDI.
James Zhan, Director of UNCTAD’s Investment and Enterprise Division, was on hand in Addis Ababa for the launch, saying “Today’s investment policies are very different from those of a decade ago. ‘New generation’ investment policies place inclusive growth and sustainable development at the heart of efforts to attract and benefit from investment. This makes investment an integral part of the financing for development discussion.”
The UNCTAD Investment Framework consists of an overarching set of Core Principles for Investment Policymaking that serve as design criteria for three sets of operational guidelines or action menus:
-
Guidelines for national investment policies.
-
Guidance for the design and use of International Investment Agreements (IIAs).
-
An action menu for the promotion of investment in sustainable development goals.
Related News
Investor-State Dispute Settlement: Review of Developments in 2014
Statistical update (as of end 2014)
In 2014, investors initiated 42 known ISDS cases pursuant to international investment agreements (IIAs). This is lower than the record high numbers of new claims in 2013 (59 cases) and 2012 (54 cases) and closer to the annual averages observed in the period between 2003 and 2010. As most IIAs allow for fully confidential arbitration, the actual number of cases is likely to be higher.
Last year’s developments brought the overall number of known ISDS claims to 608. Ninety nine governments around the world have been respondents to one or more known ISDS claims.
Respondent States
The relative share of cases against developed countries is on the rise. In 2014, 60 per cent of all cases were brought against developing and transition economies, and the remaining 40 per cent against developed countries. The share of cases against developed countries was 47 per cent in 2013, and 34 per cent in 2012, while the historical average is 28 per cent. In total, 32 countries faced new claims last year. The most frequent respondent in 2014 was Spain (five cases), followed by Costa Rica, the Czech Republic, India, Romania, Ukraine and the Bolivarian Republic of Venezuela (two cases each). Three countries – Italy, Mozambique and Sudan – faced their first (known) ISDS claims in history.
Home country of investor
Of the 42 known new cases, 35 were brought by investors from developed countries and five were brought by investors from developing countries. In two cases the nationality of the claimants is unknown. The most frequent home States in 2014 were the Netherlands (seven cases by Dutch investors), followed by the United Kingdom and the United States (five each), France (four), Canada (three) and Belgium, Cyprus and Spain (two each). This corresponds to the historical trend where developed-country investors – in particular, those from the United States, Canada and several European Union (EU) countries – have been the main users of the system responsible for over 80 per cent of all ISDS claims.
Applicable investment treaties
The majority of new cases (30) were brought under BITs. Ten cases were filed pursuant to the provisions of the ECT (twice in conjunction with a BIT), two cases under the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA), one case under the NAFTA and one case under the CanadaPeru FTA. Looking at the full historical statistics, the ECT has now surpassed the NAFTA as the most frequently invoked IIA (60 and 53 cases respectively). Among BITs, the Argentina-United States BIT remains the most frequently used agreement (20 disputes).
Economic sectors involved
About 61 per cent of cases filed in 2014 relate to the services sector. Primary industries account for 28 per cent of new cases while the remaining eleven per cent arose out of investments in manufacturing. Looking at the industries in which investments were made, the most numerous was generation and supply of electric energy (at least eleven cases), followed by oil, gas and mining (ten), construction (five) and financial services (three).
Measures challenged
The two types of State conduct most frequently challenged by investors in 2014 were (i) cancellations or alleged violations of contracts or concessions (at least nine cases); and (ii) revocations or denial of licenses or permits (at least six cases). Other challenged measures include: legislative reforms in the renewable energy sector, alleged discrimination of foreign investors vis-à-vis domestic ones, alleged direct expropriations of investments, alleged failure on the part of the host State to enforce its own legislation, alleged failure to protect investments, as well as measures related to taxation, regulation of exports, bankruptcy proceedings and water tariff regulation. Information about a number of cases is lacking. Some of the new cases concern public policies, including environmental issues, anti-money laundering and taxation.
ISDS outcomes in 2014
In 2014, ISDS tribunals rendered at least 43 decisions in investor-State disputes, 34 of which are in the public domain (at the time of writing). Of the 34 public decisions, eleven principally addressed jurisdictional issues, with six decisions upholding the tribunal’s jurisdiction (at least in part) and five decisions rejecting jurisdiction. Fifteen decisions on the merits were rendered in 2014, with ten accepting – at least in part – the claims of the investors, and five dismissing all of the claims. The remaining eight public decisions were rendered on applications for annulment and on preliminary objections.
Of the ten decisions finding States liable, six found a violation of the FET provision and seven a violation of the expropriation provision. At least eight decisions rendered in 2014 awarded compensation to the investor, including a combined award of approximately USD 50 billion in three closely related cases, the highest known award by far in the history of investment arbitration.
Five decisions on application for annulment were issued in 2014 by ICSID ad hoc committees, all of them rejecting the application for annulment.
Ten cases were reportedly settled in 2014, and another five proceedings discontinued for unknown reasons.
By the end of 2014, the overall number of concluded cases reached 356.13 Out of these, approximately 37 per cent (132 cases) were decided in favour of the State (all claims dismissed either on jurisdictional grounds or on the merits), and 25 per cent (87 cases) ended in favour of the investor (monetary compensation awarded). Approximately 28 per cent of cases (101) were settled14 and eight per cent of claims (29) were discontinued for reasons other than settlement (or for unknown reasons). In the remaining two per cent (seven cases) a treaty breach was found but no monetary compensation was awarded to the investor.
Related News
tralac’s Daily News selection: 16 July 2015
The selection: Thursday, 16 July
From Twitter: for coverage of the just-completed TIPS Annual Forum 2015, view the TL of @regrum, or #TIPSforum
Featured infographic: India's trade tanks (LiveMint)
The Financing for Development conference closes today in Addis: a selection of updates
The Addis Ababa Action Agenda (UN News Centre)
The Addis Tax Initiative declaration (International Tax Compact)
Joseph Stiglitz: 'On financing for development, we need to lead against the wind' (UNECA)
Multilayer approach to capacity building needed for digital financial inclusion (ACBF)
Africa’s economic transformation in focus at UN development financing conference (UNECA)
UNCTAD Special Editions prepared for the Third FFD conference:
Investing in Sustainable Development Goals: Part 1 - Action Plan for Private Investments in SDGs, Part 2 - Reforming International Investment Governance
Fostering Africa’s services trade for sustainable development
PPI and the poorest: New private participation in infrastructure results highlight critical role of MDBs in IDA countries (World Bank Blogs)
The newest PPI Database results show that investment commitments to infrastructure projects with private participation investment in IDA countries from 2009 to 2014 totaled US$72.8 billion. This is significant because it accounts for just seven percent of the total recorded over this period for all emerging markets and developing economies covered in the database. This is not that surprising, but does show that we have a long way to go. The number of projects with private participation in IDA countries is also only 10 percent of the total — a little better, and indicating that, unsurprisingly, projects are smaller on average in IDA countries.
Better trade logistics could jump-start Africa’s light manufacturing industry (World Bank Blogs)
Nonetheless, Africa still has some catching up to do when compared with other regions. Reform efforts should not only focus on removing barriers for trade in goods, but also for trade in services. Access to competitively produced services – including banking, insurance, communication, IT, engineering, auditing and legal services – is crucial to the development of manufacturing exports. Recent studies – such as the Bank Group report Defragmenting Africa: Deepening Regional Trade Integration in Goods and Services – have shown that poor business services for trade function as barriers to the enhanced integration of both goods and services.
Weigh bridges are faulty, transporters tell UNRA probe team (Daily Monitor)
AGOA: Report of the Government of the United States for 2014 (WTO)
In 2014, US imports under AGOA fell 52.2% from $24.8 billion to $11.8 billion, due in most part to a large drops in imports of mineral fuels and motor vehicles and their parts (HTS chapter 27 and 87 respectively). Nevertheless, mineral fuels still accounted for almost 75.9% of US imports under AGOA in 2014, compared to approximately 86% in 2013. [Download]
Abuja to host conference on economic partnership between ECOWAS, EU (Bilaterals)
An international conference designed to take a critical appraisal of the proposed Economic Partnership Agreement between Economic Community of West African States, (ECOWAS) and the European Union (EU) will take place in Abuja between July 28 and 29 2015. The event is being organized by the leading pan-African newsmagazine Africa Today. [Conference www]
Building the capacity of WTO National Consultative Committees in six SADC countries (SATH)
During August and September 2015, workshops will be held in Mozambique, Malawi, Lesotho, Zambia, Botswana, and Swaziland - countries where the Trade Hub has been offering assistance with training and capacity building for NEPs over the past two years.
Tanzania: Current account deficit narrows (Daily News)
The current account deficit narrowed 26.3% in the year to May, thanks to increased earnings from tourism and manufacturing, the central bank has said. The deficit narrowed to US$3.94bn in the 12 months to May from US$5.35bn in the same period last year. Bank of Tanzania said in its monthly economic report that higher exports of goods and services offset a decline in financial aid from Western donors, who reduced their help amid claims of corruption in government. Imports of goods and services fell to US$13.3bn from US$14.05bn previously. Total exports rose by 9.8 % to US$9.45bn. [Download]
Tourism earnings on the rise (Daily News)
WB revises Zim’s growth prospects (The Herald)
The World Bank has revised downwards Zimbabwe’s economic growth for this year but improvement is expected in 2016 going forward in line with the Sub-Saharan Africa growth trend. According to the World Bank’s Global Economist Prospects for June, Zimbabwe’s economy will grow by 1% this year and will be at 2,5% in 2016 and 3,5% in 2017.
‘Consult SMEs on policy formulation’ (NewsDay)
Tobacco season difficult: stakeholders (NewsDay)
State firms on the brink (Financial Gazette)
The AU's plans for an African passport a pie in the sky? (Institute for Security Studies)
The AU is certainly aware that this call for open borders has fallen on deaf ears many times before. The idea of an African passport has surfaced periodically at AU summits – the last time being at the July 2007 summit in Accra, Ghana – but it has never become a reality. Former Libyan leader Muammar Gaddafi, one of the great supporters of free movement in what he termed as the United States of Africa, was repeatedly voted out when he tried to push forward this idea before his death in 2011. For now, the AU has asked foreign ministers of member states to organise a retreat to discuss the issue.
Investor-State Dispute Settlement: review of developments in 2014 (UNCTAD)
Investors continue to use the investor–State dispute settlement (ISDS) mechanism. In 2014, claimants initiated 42 known treaty-based ISDS cases. The total number of known ISDS cases reached 608. 40% of new cases were initiated against developed countries (the historical average is 28%). A quarter of all new disputes are intra-EU cases.
Why BRICS trade in local currency doesn’t work for India (The Indian Express)
In any swapping arrangement, the country with the weaker currency gains. From a more strategic point of view, it makes sense for India to have local currency invoicing arrangements mostly with countries with which it enjoys a surplus in bilateral trade. India suffers a huge deficit with China (See chart). With Russia and South Africa too, India runs a deficit. It has a small advantage with Brazil. A local currency swap arrangement with countries from whom India imports will only encourage more imports.
Ufa Declaration of the IVth Trade Union Forum of BRICS countries (ITUC)
We expect that BRICS Governments will pursue more vigorously the reforming of the IMF and of the World Bank. The time has come to establish real control over large-sized MNCs operating on our territories and to subordinate their activities to development objectives. Trade unions have a role to play in this process. For this aim, we have a tripartite ILO Declaration of principles concerning MNCs and social policy.
Cyril Ramaphosa: speech at the SA-China State Owned Enterprises seminar (GCIS)
We are here to learn about best practice in the management of state-owned enterprise (SOEs). We are keen to find out more about the institutional arrangements and financial models that ensure that SOEs are sustainable and deliver on their mandate to accelerate economic growth and transformation. We would also like to know about frameworks for private sector participation in the SOEs to augment the capacity of the state.
South Africa, China expand trade (iafrica)
Deputy President Ramaphosa invited the Chinese business community to invest in South Africa, especially in the Special Economic Zones focussed on the ten investment projects agreed to between the respective governments. "Both of our governments have agreed that we need to change the structure of trade away from commodity based trade, to trade in more value added products emanating from South Africa. To this end we have presented the Chinese government with a list of 10 value added products which we would like to see incorporated into your supply chains. We have already benefitted from skills and technology transfer and would like to encourage the Chinese government to continue to support us, as we work towards closing our skills gap," he said.
Kenya to host Tokyo International Conference on African Development summit next year as Gambia bows out (The Standard)
What does the Global Entrepreneurship Summit mean for US-Kenya Relations? (The Star)
Commonwealth Sec-General aspirant, Ronald Sanders, to visit Nigeria (ThisDay)
Pact opens up Iran to renewed SA trade (Business Day)
West Africa: Capital markets integration gets boost (ThisDay)
StanChart, Lipa na M-Pesa link up for real-time money transfer (Business Daily)
China's steel firms are playing the long game in Africa (The Economist)
China’s Huawei gets security clearance to manufacture in India (LiveMint)
SUBSCRIBE: To receive the link to tralac’s Daily News Selection via email, please click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
Related News
African Growth and Opportunity Act (AGOA): Report of the Government of the United States for the Year 2014
On 27 May 2009, the United States was granted a waiver of its obligations under paragraph 1 of Article I and paragraphs 1 and 2 of Article XIII of the GATT 1994 to the extent necessary to permit the United States Government to provide duty-free treatment to eligible products of certain sub-Saharan African countries as authorized by the provisions of the African Growth and Opportunity Act (AGOA) without being required to extend the same duty-free treatment to like products of any other Member. This waiver expires 30 September 2015.
Under the terms of this waiver, the United States is required to submit to the General Council an annual report on the implementation of the trade-related provisions of AGOA with a view to facilitating the annual review provided for in paragraph 4 of Article IX of the WTO Agreement. This report covers calendar year 2014.
Duty free treatment under AGOA
AGOA was enacted on 18 May 2000. Section 506A of the Trade Act of 1974, as added by section 111 of AGOA, authorizes the President of the United States to provide duty-free treatment to certain products from eligible sub-Saharan African beneficiary countries, in addition to the products designated for duty-free treatment for these countries under the US Generalized System of Preferences (GSP). The President exercised this authority on 18 December 2000, when he designated 1,835 products as eligible for duty-free treatment in the United States when originating from an AGOA beneficiary country. Section 103 of the Trade Preferences Act of 2015 extends preferences for these products and for GSP products to AGOA beneficiary countries through 30 September 2025.
Section 506A of the Trade Act of 1974 also authorizes the President of the United States to designate certain sub-Saharan African countries as eligible for benefits under AGOA. In June 2014, President Obama withdrew Swaziland’s eligibility to receive AGOA benefits in 2015. On 23 December 2014, President Obama reinstated Guinea-Bissau’s eligibility for AGOA benefits effective immediately, and withdrew The Gambia and South Sudan’s AGOA eligibility, effective 1 January 2015. As of 30 June 2015, 39 sub-Saharan African countries were eligible for AGOA trade benefits. These countries are: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Comoros, the Republic of the Congo, Côte d’Ivoire, Djibouti, Ethiopia, Gabon, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, South Africa, Tanzania, Togo, Uganda, and Zambia.
Section 112(a) of AGOA provides duty-free treatment for certain textile and apparel products from beneficiary countries that adopt certain procedures to prevent illegal transhipment. Section 112(c) of AGOA provides duty-free treatment for apparel made in “lesser developed” beneficiary countries regardless of the source of the fabric or yarn, subject to an annual quantitative limit through 30 September 2025.
AGOA performance
Since its inception in 2000, the AGOA program has helped African beneficiary countries to expand and diversify their exports to the United States. By providing new market opportunities for African exports – especially of non-traditional and higher-value products – AGOA has helped African firms become more competitive internationally, thereby bolstering African economic growth and helping to alleviate poverty in one of the poorest regions of the world. In 2014, over 91% of US imports from AGOA-eligible countries entered the United States duty-free, under AGOA, GSP, or other zero-tariff provisions.
In 2014, US imports under AGOA fell 52.2% from $24.8 billion to $11.8 billion, due in most part to a large drops in imports of mineral fuels and motor vehicles and their parts (HTS chapter 27 and 87 respectively). Nevertheless, mineral fuels still accounted for almost 75.9% of US imports under AGOA in 2014, compared to approximately 86% in 2013. Other leading categories of US imports include apparel (HTS chapters 61 and 62), iron and steel products (HTS chapter 72), and edible fruits and nuts (HTS chapter 8). Non-oil imports under AGOA (not including its related GSP provisions) nearly quadrupled from 2001 to 2014, rising from $752 million in 2001 to $2.9 billion in 2014. South Africa is currently the largest non-oil AGOA beneficiary. Other leading beneficiary countries are Angola, Nigeria, Chad, Gabon, Kenya, the Republic of Congo, Lesotho, and Mauritius.
Motor vehicles and their parts was the leading AGOA non-oil product sector for most of the period 2001-2014. Imports under AGOA in this product sector reached approximately $1.3 billion in 2014. US imports of agricultural products, metals, certain footwear, and certain chemicals also grew during this period.
Another leading non-oil sector for the period 2001-2014 was apparel. Apparel represented 25% to 79% of total non-oil AGOA imports (not including its related GSP provisions) during this period. Imports of apparel under AGOA rose from $356 million in 2001 to $985 million in 2014. Eighteen AGOA beneficiary countries have shipped apparel products to the United States under AGOA since 2001, led by Kenya, Lesotho, Mauritius, Tanzania, Ethiopia and Botswana. The leading
The US Government has provided substantial trade-related technical assistance to AGOA beneficiary countries to help them make the most of the trade opportunities available under AGOA. For example, under the four-year, $120 million African Competitiveness and Trade Expansion (ACTE) initiative, the US Agency for International Development operates three Regional Hubs for Global Competitiveness – in Botswana, Kenya, and Ghana – that assist African governments and businesses to identify and develop market opportunities in the United States for African products, especially value-added and non-traditional products such as those covered under AGOA.
Statistical annexes are provided to present a detailed description of the trade aspects of the AGOA programme from 2006 to 2014.
Related News
Better trade logistics could jump-start Africa’s light manufacturing industry
Labor-intensive, light manufacturing industries led the economic transformation of some of the most successful developing countries in the world, including China and Vietnam. In Sub-Saharan Africa, that was simply not the case.
The region’s share of the global light manufacturing market has declined to less than one percent since China’s emergence in the 1980s. Nevertheless, a review of recent trends in exports suggests that some East African countries – Ethiopia, Kenya, Tanzania, Uganda and Zambia – are making headway in light manufacturing industries.
According to the World Bank Group’s 2011 report, pdf Light Manufacturing in Africa (2.57 MB) , the global trading environment “favors Sub-Saharan Africa if it can overcome key constraints in the most promising subsectors.”
Those subsectors include the manufacture of food products and beverages; apparel and the dressing and dyeing of fur; wood and wood products; luggage and the tanning and dressing of leather; and fabricated metal products. Sub-Saharan Africa enjoys low labor costs and abundant resources, as well as preferential trade access to US and EU markets for light manufactures.
Despite these advantages, the competitiveness of Africa’s light manufacturing industry continues to be undermined by the costs of importing and exporting intermediate inputs of both goods and services.
Over the past two decades, technological advancements and falling transport costs have led to the splitting up of production activities; different stages of the production process are now located across different countries and involve a range of suppliers who provide inputs and add value to a given product destined for domestic and/or overseas markets. With the prevalence of “global value chains” (GVCs), trade logistics inefficiencies and related costs are amplified along the supply chain.
Realizing how important trade logistics performance is to participation in GVCs and the development of light manufacturing exports, many African economies are starting to seriously tackle efficiency reforms. They are streamlining procedures, reducing documents, implementing automation, adopting risk management systems for border inspections, and establishing one-stop border posts.
Recommendations for improving Africa’s trade logistics environment
Nonetheless, Africa still has some catching up to do when compared with other regions. Reform efforts should not only focus on removing barriers for trade in goods, but also for trade in services. Access to competitively produced services – including banking, insurance, communication, IT, engineering, auditing and legal services – is crucial to the development of manufacturing exports.
Recent studies – such as the Bank Group report pdf Defragmenting Africa: Deepening Regional Trade Integration in Goods and Services (1.85 MB) – have shown that poor business services for trade function as barriers to the enhanced integration of both goods and services.
In the case of Africa, the movement of manufacturing cargo is hurt by the quality of professional logistics services providers. This is both a regulatory and commercial performance problem. It is related to market entry and qualification requirements, licensing, competition, taxation, and restrictions on foreign ownership, as well as regulations for foreign suppliers and lack of professionalization and training opportunities for logistics-providers. Tackling these issues is critical for reducing restrictions on cross-border trade in services and promoting the overall economic competitiveness of Africa’s light manufacturing industry.
All in all, the successful implementation of these reforms requires a holistic approach that not only addresses Africa’s infrastructure weaknesses, but also burdensome policies, procedures and regulations that limit the movement of people, goods and services. Throughout the entire reform process, it is critical to engage with all private sector stakeholders. They will serve as the main drivers of change and ensure that the benefits of improved trade logistics are actually passed on to producers and consumers of Africa’s light manufactures.
Related News
Countries reach historic agreement to generate financing for new sustainable development agenda
Countries agreed on 15 July 2015 on a series of bold measures to overhaul global finance practices and generate investments for tackling a range of economic, social and environmental challenges at the United Nations Third International Conference on Financing for Development, held in Addis Ababa.
The groundbreaking agreement, the “Addis Ababa Action Agenda”, provides a foundation for implementing the global sustainable development agenda that world leaders are expected to adopt this September.
The agreement was reached by the 193 UN Member States attending the Conference, following negotiations under the leadership of Ethiopian Foreign Minister Tedros Adhanom Ghebreyesus.
The agreement, adopted after months of negotiations between countries, marks a milestone in forging an enhanced global partnership that aims to foster universal, inclusive economic prosperity and improve people’s well-being while protecting the environment.
UN Secretary-General Ban Ki-moon said, “This agreement is a critical step forward in building a sustainable future for all. It provides a global framework for financing sustainable development.” He added, “The results here in Addis Ababa give us the foundation of a revitalized global partnership for sustainable development that will leave no one behind.”
The Conference is the first of three crucial events this year that can set the world on an unprecedented path to a prosperous and sustainable future. Its outcome provides a strong foundation for countries to finance and adopt the proposed sustainable development agenda in New York in September, and to reach a binding agreement at the UN climate negotiations in Paris in December that will reduce global carbon emissions.
Financing is considered the linchpin for the success of the new sustainable development agenda, which will be driven by the implementation of 17 sustainable development goals.
Close to 150 world leaders will adopt the new goals at the Sustainable Development Summit in New York this September. The goals address global priorities including ending poverty and hunger, reducing social inequality, tackling climate change, and preserving the planet’s natural resources.
In support of implementation of the sustainable development goals, the Addis Ababa Action Agenda contains more than 100 concrete measures. It addresses all sources of finance, and covers cooperation on a range of issues including technology, science, innovation, trade and capacity building.
The Action Agenda builds on the outcomes of two previous Financing for Development conferences, in Monterrey, Mexico, and in Doha, Qatar.
Wu Hongbo, the Secretary-General of the Conference, said, “This historic agreement marks a turning point in international cooperation that will result in the necessary investments for the new and transformative sustainable development agenda that will improve the lives of people everywhere.”
Domestic resource mobilization is central to the agenda. In the outcome document, countries agreed to an array of measures aimed at widening the revenue base, improving tax collection, and combatting tax evasion and illicit financial flows. Countries also reaffirmed their commitment to official development assistance, particularly for the least developed countries, and pledged to increase South-South cooperation.
The outcome document also underscores the importance of aligning private investment with sustainable development, along with public policies and regulatory frameworks to set the right incentives. A new mechanism that will facilitate financing for new technologies for developing countries was also agreed upon.
The Addis Ababa Action Agenda includes important policy commitments and key deliverables in critical areas for sustainable development, including infrastructure, social protection and technology. There were agreements for international cooperation for financing of specific areas where significant investments are needed, such as in infrastructure for energy, transport, water and sanitation, and other areas to help realize the proposed sustainable development goals.
Countries also stressed the importance of nationally owned sustainable development strategies, supported by integrated national financing frameworks.
“We reiterate that each country has primary responsibility for its own economic and social development and that the role of national policies and development strategies cannot be overemphasized,” the agreement states.
The Addis Ababa Action Agenda
To achieve these goals, countries also agreed to new initiatives, including on:
-
Technology – Countries agreed to establish a Technology Facilitation Mechanism at the Sustainable Development Summit in September to boost collaboration among governments, civil society, private sector, the scientific community, United Nations entities and other stakeholders to support the sustainable development goals.
-
Infrastructure – Countries agreed to establish a Global Infrastructure Forum to identify and address infrastructure gaps, highlight opportunities for investment and cooperation, and work to ensure that projects are environmentally, socially and economically sustainable.
-
Social protection – Countries adopted a new social compact in favour of the poor and vulnerable groups, through the provision of social protection systems and measures for all, including social protection floors.
-
Health – Countries agreed to consider taxing harmful substances to deter consumption and to increase domestic resources. They agreed that taxes on tobacco reduce consumption and could represent an untapped revenue stream for many countries.
-
Micro, small and medium-sized enterprises – Countries committed to promote affordable and stable access to credit for smaller enterprises. They also pledged to develop and operationalize a global strategy for youth employment and implement the International Labour Organization Global Jobs Pact by 2020.
-
Foreign aid – Countries recommitted to achieve the target of 0.7 per cent of gross national income for official development assistance, and 0.15 to 0.20 per cent for least developed countries.
-
A package of measures for the poorest countries – Developed countries commit to reverse the decline in aid to the poorest countries, with the European Union committing to increase its aid to least developed countries to 0.2 per cent of gross national income by 2030. They also agree to adopt or strengthen least developed countries investment promotion regimes, including with financial and technical support. Governments also aim to operationalize the technology bank for this group of countries by 2017.
-
Taxation – The Agenda calls for strengthening support for the work of the UN Committee of Experts on International Cooperation in Tax Matters to improve its effectiveness and operational capacity, and the engagement with the Economic and Social Council. It emphasizes the importance of inclusive cooperation and dialogue among national tax authorities.
-
Climate Change – The Action Agenda calls on developed countries to implement their commitment to a goal of jointly mobilizing USD100 billion per year by 2020 from a wide variety of sources to address the needs of developing countries. Countries also committed to phase out inefficient fossil fuel subsidies that lead to wasteful consumption.
In addition, there were about 200 side events, where governments and other stakeholders announced additional commitments. These included additional aid for capacity building in the area of taxation; financing through development banks, including $400 billion from the World Bank Group, as well as establishment of new international development banks; and increased aid and philanthropic funding for social needs.
Related News
Africa’s economic transformation in focus at UN development financing conference
A lack of industrialization puts Africa’s long-term growth at risk, a senior United Nations official said on Wednesday, as participants at the Third International Conference on Financing for Development discussed the economic transformation of the continent.
“Manufacturing has stagnated over the continent during the past decade and makes up a shrinking share of Africa’s exports,” said Carlos Lopes, the Executive Secretary of the UN Economic Commission for Africa (UNECA). “Africa’s growth has struggled to create adequate jobs for its growing youth and the only way it’s going to be able to do it is through industrialization.”
Mr. Lopes was one of several speakers at a side event at the conference in Addis Ababa, Ethiopia, that examined three critical issues for Africa’s transformation: modernizing agriculture; inclusive and sustainable industrialization; and sustainable infrastructure and energy.
He noted that the shrinking contribution of agriculture to Africa’s gross domestic product (GDP) has been accompanied by growth in the contribution of the services sector rather than industry or manufacturing. Industry and manufacturing have been in fact been contributing less and less to the continent’s GDP, excluding parts of North Africa, where its contribution has stagnated.
Africa currently accounts for less than two per cent of global manufacturing exports, Mr. Lopes pointed out. The percentage of manufactured goods in Africa’s exports to the world has fallen from 26 per cent in 1995 to 16 per cent in 2013. As a comparison, manufactured goods make 69 to 70 per cent of developing Asia’s global exports in 2013.
Donald Kaberuka, President of the African Development Bank, called infrastructure the “signature of African development.” He noted that over the last decade during which he has led the institution, the Bank has put out $28 billion for infrastructure. This is almost three times what the Bank has done over 40 years.
“This is because I concluded that the way African economies were growing, it was not possible to grow until we close the infrastructure gap,” he stated.
Giving an overview of the situation, Nkosazana Dlamini Zuma, Chairperson of the African Union Commission, told the gathering that by 2013, only a third of Africa’s population had access to electricity; 65 per cent had access to water; and only 38 per cent had access to sanitation. Also, in 2013, the continent spent four per cent of GDP on infrastructure, compared to 14 per cent by China in the same year.
For a continent with abundant land and water, she noted, Africa imports a “ridiculous” amount of food and suffers from food insecurity. According to the UNECA, Africa imported 83 per cent of its food items from outside the continent in 2013.
Ms. Zuma also stressed the need to move on the “African skills revolution,” and invest in empowering people – the young, women and men.
“We are determined that our generation shall not be one of missed opportunities. Instead, we will remain steadfast in playing our part… to build an Africa that is peaceful, integrated, people-centred and prosperous and takes its rightful place in the world.
Agnes Kalibata, President of AGRA [the Alliance for a Green Revolution in Africa], stated that sustainable and inclusive economic progress is nearly impossible when large segments of the continent’s population are stuck in subsistence farming.
“While African economies have been growing and rising over the last 10 years, the vast potential of its agriculture has remained largely untapped,” she said, adding that evidence shows that investments made in the agriculture sector are considered more effective than investments made in many other sectors at reducing poverty and producing economic benefits and inclusive growth.
“We also know that failing to invest in agriculture and smallholder farmers not only limits economic growth today but can also impede opportunities in the future. If farming families are unable to grow enough to feed their children, malnutrition will continue to grow with a severe cost to the human development of the next generation,” Ms. Kalibata stated.
“As we look to the future, we all share a collective responsibility to ensure that the ‘Africa Rising’ narrative is a reality for all Africans. There’s no way this can be achieved without improving productivity and income for smallholder farmers.”
Related News
Better tax systems crucial for development
Mobilising the revenues needed to further development and improve people’s lives will depend on broader tax bases, stronger tax institutions, and redoubled efforts to stem both cross-border and domestic tax evasion and avoidance. In many countries billions of dollars are lost every year to narrow tax bases, weak administrative capacity, and poor tax compliance. Helping countries to strengthen their tax systems and achieve the Sustainable Development Goals (SDGs) requires a new framework for action.
In launching the Addis Tax Initiative, over 30 countries and international organisations have now teamed up to strengthen international cooperation in this area. The Initiative highlights the crucial importance of domestic revenue for financing development and specifically stresses the importance of tackling domestic and cross-border tax evasion and avoidance.
Harnessing the momentum of the Financing for Development agenda, the Addis Tax Initiative brings new energy and enthusiasm to the field of domestic resource mobilisation (DRM), emphasizing the importance of building sustainable DRM capacity through increased technical cooperation, strong domestic governance and institutions, and the political will to drive forward tax system reforms.
In the spirit of the Addis Ababa Action Agenda, the countries subscribing to the Addis Tax Initiative declare their commitment to enhance the mobilisation and effective use of domestic resources and to improve the fairness, transparency, efficiency and effectiveness of their tax systems. Concretely, participants commit to step up efforts as specified below:
-
Participating providers of international support will collectively double their technical cooperation in the area of domestic revenue mobilisation and taxation by 2020;
-
Partner countries restate their commitment to step up domestic resource mobilisation as a key means of implementation for attaining the SDGs and inclusive development; and
-
All countries restate their commitment to ensure Policy Coherence for Development.
In addition to broad-based capacity building, participating providers of international support stand ready to expand cooperation in the following areas:
-
Enabling partner countries take advantage of the progress made on the international tax agenda, such as the OECD/G20 Base Erosion and Profit Shifting (BEPS) project and the Global Forum on Tax Transparency and Exchange of Information for Tax Purposes;
-
Integrating partner countries into the global tax debate; and
-
Improving taxation and management of revenue from natural resources.
In addition to routine OECD-DAC reporting, the International Tax Compact (ITC) will play a coordinating role to monitor and report on the increased support facilitated by this Initiative.
An ITC/OECD discussion paper released last week, ‘Examples of Successful DRM Reforms and the Role of International Co-operation’, illustrates country cases where substantial improvements in both DRM capacity and revenues were facilitated by international support. These include an increase of US$55 million collected in Kenya due to better transfer pricing and a ten-fold increase in tax revenue in Colombia.
The following countries have joined the Addis Tax Initiative: Australia, Belgium, Cameroon, Denmark, Ethiopia, European Commission, Finland, France, Italy, Germany, Ghana, Indonesia, Kenya, Korea, Liberia, Luxembourg, Malawi, Netherlands, Norway, Philippines, Sierra Leone, Senegal, Slovenia, Sweden, Switzerland, United Kingdom, and the United States.
In addition, the following international organisations have expressed their support for the Addis Tax Initiative: African Tax Administration Forum (ATAF), Commonwealth Association of Tax Administrators (CATA), Inter-American Centre of Tax Administrations (CIAT), IMF, OECD, World Bank and the Bill and Melinda Gates Foundation
Related News
Africa needs to preserve its policy space in global negotiations, says ECA Chief
As Africa hosts the 3rd Financing for Development meeting in Addis Ababa, Mr. Carlos Lopes, Executive Secretary of the United Nations of Economic Commission for Africa is confident that Africa’s agenda is now influencing how the continent negotiates its deals.
“Africa has been vigorously promoting its own agenda and it is based on that agenda that it negotiates,” said Lopes. “The continent is conscious that all these global compacts are not going to be the transformative elements of Africa’s future. We are trying to get the best we can out of the deal but not confuse that deal with our future”.
He later tweeted that “the test of Africa is to get the best out of the deal but not let the deal affect our future”.
The ECA boss told the FFD participants that two years ago, for the first time in the history African countries decided to establish a high level committee of ten Heads of States that are responsible for all the post 2015 negotiations.
“This committee will define the interest of the continent in relation to the Africa’s defined agenda, which is spelled out in a form of vision and aspirations: ‘Agenda 2063’ and ‘the 10 year-plan’ that was approved in March 2015 by the Conference of Ministers of Finance and Economic Development of the Africa,” said Lopes. He elucidated that Industrialization on the continent is a key message of these documents. “Africa has to industrialize in a different way than what was done by other regions. Africa shall learn from the mistakes of others and will not necessarily need to do the same mistakes,” he affirmed.
With regards to Addis Ababa Financing for Development conference, Lopes believes that the meeting is different from the previous ones held in Monterrey, Mexico in 2002 and Doha, Qatar in 2008.
“The Addis Ababa meeting focuses on financial and non-financial sources of funding, which is unique,” he said. ”There are no new financial resource commitments we should expect. Most of the commitments here will focus on enhancing policy environment to leverage financial and non- financial resources.”
Lopes called for Africa to preserve its policy space saying that the continent should be careful, know what the deal is and avoid giving too much and taking anything.
He also called for clear mechanism for international debts and financial management.
“The outcomes from both Monterrey and Doha include clear commitment towards international debts workout mechanism but what we know is that little has been achieved so far,” he said. “It is crucial for Addis Ababa meeting to introduce clear mechanism in this regards and engage all stakeholders to build on consensus on how to close many gaps that exist in current financial architecture,” he said.
Lopes went on expressing how since 1970 there have been more than 180 sovereign debt restructurings initiatives highlighting that the future international architecture needs concrete and binding mechanism.
Related News
tralac’s Daily News selection: 15 July 2015
The selection: Wednesday, 15 July
From Twitter:
Ambassador Mxolisi Nkosi @Malangenis
The European Commission has lifted a ban on SA ostrich and meat products, imposed in 2011 following the outbreak of FMD in the country. In total, approximately R4bn ($324 million) of exports of meat including game could be exported from SA to the EU.
See the TL of @AdanMohamedCS for a series of tweet updates on Kenya's SGR and procurement issues (following a meeting yesterday between SGR contractors, the China Rail & Bridge Corporation and Kenya's private sector). [Locals losing out to foreign suppliers in new rail project (Daily Nation)]
Selected #FFD3 updates:
Achim Steiner: speech at the Third International Conference on Financing for Development (UNEP)
Which brings me to a central message that I want to share with you today: a significant portion of financial innovation and leadership is coming from the Global South. The People's Bank of China is a leader in green credit policies and is by far the largest investor globally in renewable energies. All Brazilian banks are now mandated to mainstream environmental considerations into lending decisions. India saw over 18 million bank accounts open in one week in that country's efforts to promote financial inclusion. Ladies and gentlemen, mobilizing finance for sustainable development is no longer a North-South issue.
Increasing Africa’s fiscal space: Tax to finance Africa’s sustainable development (UNECA)
“A mere 0.44% increase per annum in tax collection in African states can mobilise about 22 billion a year which can be used to finance development projects,” suggested Mr. Carlos Lopes, ECA’s Executive Secretary to delegates attending a side event in the margins of the ongoing Third International Conference on Financing for Development.
For an extensive summary of statements by finance and development ministers at FFD: see here
Extract: Nhlanhla Nene, Minister of Finance of South Africa, speaking on behalf of the “Group of 77” developing countries and China, expressed deep concern about illicit financial flows and reaffirmed commitments made in the Rio+20 outcome in that regard. He urged the United Nations to pay attention to the 2015 African Union summit outcome on illicit financial flows, which should be replicated in other regions so that agreements could be forged to cap those flows at origin, transit and destination points. The Conference outcome, he added, should embrace high-quality deliverables and resemble the scope of both the Monterrey Consensus and Doha Declaration. The traditional definition of ODA also should be maintained, as should the separation between the financing for development track and the sustainable development goals. The committee on tax matters should be upgraded to an intergovernmental entity.
Political support in Addis summit seen as key in global tax reforms (The East African)
Addis FFD: an intergovernmental tax body? (Alex Cobham Blog)
Declaration of the Independent Commission for the Reform of International Corporate Taxation
Third ISID Forum: 'Financing for inclusive and sustainable industrial development' (UNIDO)
Carlos Lopes, Amina J. Mohammed: 'Financing for Africa’s transformation' (UNECA)
Rwanda: Financing inclusive development (World Bank)
The eighth edition of the Rwanda Economic Update, Financing Development: The Role of a Deeper and More Diversified Financial Sector, explores options for how the financial sector can develop an efficient, sound, and inclusive financial sector to help the government achieve its development vision and the benefits from a well-managed, broad-based financial sector can benefit more Rwandans.
This time last year, we estimated the 2014 growth rate at 5.7%. Against all odds, the economy grew by 7%. However, growth outlook is not entirely bright. While the oil price decline has brought a positive impact on inflation and trade, recent economic indicators show some weaknesses. Also, global risks (an increase in US interest rate, slow down of Chinese and Euro economies, and an appreciation of the US dollar) are emerging. In the medium to long-term, Rwanda’s economic resilience will not be achieved without keeping high investment rates. [Download]
Building financial capability in Rwanda (World Bank Blogs)
Cement producers raise alarm on import ‘cheats’ (Tanzania Daily News)
Revenue authorities in the East African region have reported over 60bn/- loss through misinvoicing and other malpractices, a study by the East Africa Cement Producers Association (EACPA) has stated. The Tanzania Portland Cement Company (TPCC) Managing Director and Area Manager East Africa, Mr Alfonso Rodriguez, said the matter has been reported in several occasions to relevant authorities. He said importation of substandard cement is mainly a threat to the end user and security of buildings and infrastructure in the region, especially Tanzania. "Lack of proper quality certification at origin and permissively of Tanzania Bureau of Standards (TBS) officials has allowed uncertified cement to dump products in the domestic market. creating unfair competition situation that needs to be addressed," he said.
Deadline looms for COMESA to ease travel rules (Business Daily)
Kenya and its 18 trading partners from eastern and central Africa have only two months to provide timelines for removing border controls that have curtailed movement of people and slowed the pace of trade in the region. The new deadline, set for September 30, follows the signing of a Tripartite Free Trade Agreement in June.
Kampala to host regional intelligence centre (New Vision)
Uganda is to host a regional intelligence coordination centre for the East African Community and IGAD member states to facilitate sharing information on regional threats. The proposal to set up the facility in Uganda is scheduled to be endorsed on Wednesday at a meeting of intelligence and security chiefs from the regions in Kampala. The joint intelligence centre to be established in Kampala will be supported by the African Union and is different from the facility established in Kenya.
TIPS Annual Forum 2015: 'Regional industrialisation and regional integration' (TIPS)
The conference [which concludes today] aims to deepen understanding of regional industrialisation, the role of South Africa in that context, the value chains operating across the region, and the links between regional industrialisation and regional integration.
Trade between China and Portuguese-speaking countries falls between January and May (MacauHub)
Trade between China and Portuguese-speaking countries recorded an annual decline of 28.18% in the period from January to May to US$38.31bn, according to Chinese customs data recently published in Macau. In the first five months of the year, China sold goods to the eight Portuguese-speaking countries worth US$16.513bn (-2.84%) and bought goods amounting to US$21.797bn (-40.03%), registering a trade deficit of US$5.284bn. With Angola, two-way trade registered an annual contraction of 46.70% to US$8.789bn, with China selling goods worth US$1.908bn (+ 11.58%) and purchasing goods totalling US$6.881bn (-53.45%).
Kenya to host India-Africa Expo 2015 (Daily Nation)
India and Kenya are planning India-Africa ICT Expo 2015 that will bring together over 100 top companies. These companies are leading in IT software and training and are looking to invest in the African market as they begin partnering with local firms. India and Kenya have growing trade and commercial ties with bilateral trade amounting to $4.47 billion in 2013-14. India's exports to Kenya are currently at $4.18 billion; the balance of trade is heavily in India's favour.
Global implication of lower oil prices (IMF)
Most countries in sub-Saharan Africa regulate fuel prices with discretionary adjustments, resulting in a low pass-through to the fall in oil prices. Slightly more than half of African countries regulate fuel prices in a discretionary way, while 40% rely on automatic adjustment formulas. Retail prices fell in most countries in the second half of 2014, but at a slower pace than the drop in international prices. In some countries (Angola, Cameroon, Ghana, and Madagascar), domestic prices rose in the context of fuel pricing reforms. As in other regions, the pass-through among net oil exporters was smaller (close to zero).
Madagascar: Trade Policy Review documentation (WTO)
Weak shilling sends CBK back to the drawing board (Business Daily)
AirNam flying illegally to SA (The Namibian)
Malawians fronting Chinese interest in illegal timber harvesting licences (Malawi24.com)
SADC: Ministerial Committee of Organ on Politics, Defence and Security meets in Pretoria (Angola Press)
Justice Phumaphi to preside over Lesotho crisis (Mmegi)
IGC Mozambique Growth Week 2015
Mozambique: Twelve Portuguese companies employ 22,000 people (MacauHub)
Zambia hikes petrol, diesel prices by 13% - energy regulator (Reuters)
Investing in Sustainable Development Goals (UNCTAD)
SUBSCRIBE: To receive the link to tralac’s Daily News Selection via email, please »click here to subscribe«.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
Related News
Rwanda Economic Update: Financing inclusive development in Rwanda
A strong, diversified financial sector can help the government gradually transition from aid, finance its development and benefit a larger group of Rwandans, according to a new report from the World Bank Group.
The eighth edition of the Rwanda Economic Update, Financing Development: The Role of a Deeper and More Diversified Financial Sector, explore options for how the financial sector can develop an efficient, sound, and inclusive financial sector to help the government achieve its development vision and the benefits from a well-managed, broad-based financial sector can benefit more Rwandans.
“Despite recent international and domestic economic developments in Rwanda the Bank’s growth projection is optimistic at 7.4 percent in 2015 and 7.6 percent in 2016,” says Yoichiro Ishihara, World Bank senior economist. “Developing a stable, sound and efficient financial sector will contribute to the government’s goal to transform the country into a middle-income country by 2020.”
After successfully weathering a drop in aid financing in 2012, Rwanda’s economy surpassed expectations with a jump in the Gross Domestic Product (GDP) from 4.7% in 2013 to 7.0% in 2014. The country’s financial sector has made great strides towards modernizing, yet limited access to external investments and anemic exports threaten to undermine progress.
The report’s recommendation to develop a sound, stable and diverse financial sector to support the country’s development comes on the heels of recent domestic budget issues that offer mixed signals on Rwanda’s future economic direction. Internal financial issues such as low tax to GDP ratio, a significant reliance on declining foreign aid, and a deterioration in current account deficits (from 7.4% of GDP in 2013 to 11.8% in 2014) dampen the country’s forward moving economy.
The government has invested in economic development but has not developed vibrant tradable sectors such as export crops, manufacturing and mining. The combination of high public investment and low export revenues has increased reliance on foreign financing, mainly in aid. Steps to diversify and strengthen the country’s financial investments and institutions will stabilize Rwanda’s positive economic growth, and help ensure the poverty rate continues to decrease as expected, to 54% in 2016, down from 63% in 2011.
“A stable financial sector provides a foundation for the achievement of all of the government’s strategic objectives, including in social development and governance,” says Carolyn Turk, World Bank’s Country Manager for Rwanda. “The steps in this economic update can accelerate the development of the financial sector in Rwanda, which is essential in financing development and for maintaining the economy’s strong expansion.”
To help Rwanda accelerate the development of an efficient, strong and inclusive financial sector the update makes several recommendations:
-
Expand into an integrated regional market to achieve a larger scale to improve the ability of regional firms to access capital markets for long-term financing needs. As part of this effort, Rwanda and Kenya have recently connected their stock markets electronically.
-
Support institutions to facilitate domestic and foreign debt financing, including through bond issuance, and accessing international capital markets.
-
Encourage institutional investors, such as pension and insurance funds, to invest in long-term projects. The most important source of such long-term financing in Rwanda is the Rwanda Social Security Board.
-
Strengthen the ability of banks to include the currently unbanked into the banking system, to support inclusion and ultimately realize the benefits of economies of scale.
-
Carefully weigh the benefits against the costs of borrowing, while allowing for the exchange rate risk that comes with borrowing in foreign currency.
Related News
Partnerships key for implementation of post-2015 development agenda and financing inclusive and sustainable industrialization, say participants at Addis event
Multi-stakeholder partnerships for mobilizing financing for industrial infrastructure and industrial projects, ranging from small and medium-sized enterprises to international large-scale investments, were the focus of an international event that took place in the Ethiopian capital on Tuesday.
The third Forum on “Financing for inclusive and sustainable industrial development” was organized by the United Nations Industrial Development Organization (UNIDO), together with the governments of Ethiopia and Senegal, and the United Nations Economic Commission for Africa (UNECA), on the margins of the Third International Conference on Financing for Development.
“Achieving the Sustainable Development Goals (SDGs) requires more than finances. I am convinced that partnerships are the means to implement the post-2015 development agenda. When countries industrialize in an inclusive and sustainable way, they can create decent jobs and preserve their resources without exploiting the environment or people,” said Ban Ki-moon, UN Secretary-General. Inclusive and sustainable industrialization is more than likely to play a significant role in the post-2015 development agenda. The first official ‘zero draft’ of the SDGs features Goal number 9 which aims to “build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”.
LI Yong, the Director General of UNIDO, said: “The crucial challenge that the global community has gathered here in Addis Ababa to address is how to finance the achievement of the SDGs. In my view, this challenge is so immense that no single entity or institution will be able to overcome it on their own. I firmly believe that it can only be resolved through effective multi-stakeholder partnerships bringing together all the major players in the development process, including governments, bilateral and multilateral development agencies, national and international development finance institutions, the private sector, civil society and academia.”
Hailemariam Desalegn, Prime Minister of Ethiopia, noted that his country’s overall goal of attaining middle-income status rested on the growth of the manufacturing sector. “My government is not only continuing to heavily invest in infrastructure and on developing the necessary human capital with the required skills and know-how, but also in setting up industrial zones and agro-food parks which are expected to serve as the epicenter of the agro-industrial transformation process in our country,” he said. Commending UNIDO’s Programme for Country Partnership, being implemented in Ethiopia and Senegal, Desalegn said it will help further develop suitable institutional capacity and an enabling infrastructure, and facilitate the creation of a vibrant private sector and an overall conducive business environment “for the realization of inclusive and sustainable industrial development, which can only be achieved in partnership with all stakeholders”.
Speaking about the Plan Sénégal Emergent, which aims to make his country an emerging economy by 2035, Amadou Ba, Minister of Economy and Finance of Senegal, said the plan focuses, among other matters, on the development of the country’s industrial potential. “In this regard, UNIDO’s Programme for Country Partnership enables quality technical assistance delivery, and introduces innovative financing models through the synchronization and the coordination of resources from the government, the private sector and development partners within an integrated framework,” he said. According to the minister, the Government of Senegal has decided to allocate national financial resources for the implementation of the Programme for Country Partnership for Senegal.
Participants discussed public finance for industrial infrastructure and its benefits for attracting investment, job creation and export promotion, and ways to align private finance to the industrial strategy of governments and to attract quality foreign investment in large industrial projects. They also looked at challenges for future official development assistance, and at prospects for investments in developing and emerging countries, as well as at UNIDO’s role as a neutral broker in coordinating and forging partnerships, creating synergies and facilitating technology transfer. At the end of the Forum, participants took part in a field visit to the Eastern Industrial Zone, an industrial park where light manufacturing factories have recently been established as a result of foreign direct investment.
Related News
Trade Policy Review: Madagascar
The third review of the trade policies and practices of Madagascar takes place on 14 and 16 July 2015. The basis for the review is a report by the WTO Secretariat and a report by the Government of Madagascar.
Report by the Secretariat: Summary
Madagascar is slowly recovering from the sociopolitical crisis which broke out in 2009 and was brought to an end by the December 2013 presidential elections. The economic upturn which began in 2014 has been boosted by the strong performance of rice farming and the extraction and subsequent exportation of heavy metals such as nickel, cobalt and titanium. Trade reforms, especially in the area of trade facilitation, have also played a part.
Madagascar has experienced far-reaching changes in the structure of its merchandise trade since the previous review of its trade policy in 2008. The country has become a major exporter of nickel and other minerals and ores. Agrifood exports have become more diversified, reflecting the immense wealth of Madagascar’s land and of Malagasy know-how. Services exports have also grown, representing a market of close to US$1.4 billion, in view of the importance of tourism. Exports of made-up clothing, traditionally Madagascar’s leading export group, plummeted with the end of the preferences granted by the United States under the AGOA, which were reinstated in June 2014.
Overall, economic growth in the period 2009-2014 (averaging less than 1% per year) remained well below its potential, as Madagascar emerged from its fourth sociopolitical crisis in 20 years. These recurrent crises have discouraged external partners and plunged the population into severe poverty: more than 90% of the country’s inhabitants (compared to less than 70% in 2005) are living on less than 2 US dollars a day, and many people suffer from malnutrition. Madagascar will be unable to achieve most of the Millennium Development Goals (MDGs) by 2015, even those which had been considered achievable before the most recent crisis.
The crisis and its various consequences (including the rundown state of basic infrastructure – transport, energy and water in particular, the worsening of the country’s governance problems and the subsequent drying up of all forms of foreign aid), caused a sharp fall in government revenue. With operating expenses remaining high, the public deficits which should have ensued were contained by cuts in the investment budget. Even so, the fiscal deficit (including grants) amounted to 3.5% of GDP in May 2015. The Central Bank has contributed, in accordance with its statutes, to financing the budget deficit, and the other domestic banking institutions have also made contributions. The resulting crowding-out effect, along with a judicial environment inspiring but little confidence (including in regard to the realization of bank guarantees), has been instrumental in maintaining lending rates at very high levels approaching 50%.
Inflation in Madagascar, the main determinants of which include the prices of agricultural products (especially food products) on local markets and the prices of imported petroleum products, has been gradually lowered from 10.3% in 2007 to around 6% recently, as a result of State subsidies in the form of a parallel preferential exchange rate (overvaluation of the national currency, the ariary) for imports, together with several successful rice-growing seasons. The import subsidies on petroleum products did, however, contribute to the shrinking of the country’s international reserves (equivalent, on average, to 2.9 months of goods and non-factor services imports between 2008 and 2013), leading to the reintroduction of the requirement that a portion of export earnings be repatriated and converted into ariary. The national currency has fluctuated somewhat, with an overall trend towards appreciation of the real effective exchange rate and, therefore, towards a less competitive domestic economy. Overall, the sharp decline in imports and exports of goods and services, which fell from 80% to less than 70% of GDP between 2008 and 2014 despite the growth in mining exports, reflected, among other things, a slight dip in the importance of trade for Madagascar.
The mining sector owes its strong performance to major foreign direct investment in two mining projects, despite the country’s political instability. Since the start of operations to extract nickel, cobalt, titanium and other heavy metals in 2013, the Malagasy economy has become essentially mining-based, and now obtains a third of its export earnings from these products. Nevertheless, the mining sector’s contribution to GDP is just 4%, as the products exported are generally unprocessed, and gold and precious stones are extracted and exported for the most part on an informal basis. In any event, at present Madagascar does not have the infrastructure needed to produce electricity in the quantity normally required by a mineral processing industry.
Restructuring the electricity operator JIRAMA and upgrading the country’s electricity supply had already been identified as priorities in Madagascar’s previous review, in 2008. These priorities remain as relevant as ever, and Madagascar’s per capita electricity consumption is less than one tenth of average African consumption. Although the sector is, de jure, open to competition, the fact that electricity selling prices are fixed by the State at low levels (below production cost) does not encourage the entry of new operators. Some economic operators are obliged to lease costly and polluting generators in order to produce their own power.
In the petroleum sector, the State has also intervened in many trade-related areas, such as price setting, the suspension of duties and taxes, and a parallel preferential exchange rate. Some services, in particular maritime cabotage of petroleum products and the provision of aviation fuel, are currently in the hands of suppliers holding monopolies. In this connection, the drop in global prices in 2014 should prompt the Government to reinstate the “true price level” of these products on the domestic market and undertake a reform of the sector. Customs duties on mining and energy products are 7% on average, with rates ranging up to 20%.
Madagascar’s agriculture has also been through very difficult years since 2010, with virtually zero growth over the review period and a sharp decline in 2013, when the rice and maize harvests were destroyed by swarms of locusts, a cyclone, floods and drought. Unlike a number of African LDCs, Madagascar appears to have been unable, over the past decade, to adopt the means needed to bring about a real increase in food production; in 2013, net food production per capita had fallen back to its 2004 level. As a result, there has been a substantial increase in imports of most food products since 2008.
The agricultural sector also offers tremendous export potential through a range of niche products, such as cloves, vanilla, lychees, honey, foie gras, groundnuts, cocoa paste and unroasted coffee. Madagascar still has vast swathes of potentially arable, but still unexploited land on which to develop such production, but the land problem is currently one of the key challenges to investment in the country. A wide-ranging reform of land legislation, initiated in 2005, has already led to significant progress in making property ownership more secure. It would be sensible to broaden this reform to encompass the conditions of access to real estate by foreigners, which might be re-examined and published on the Internet. Although foreigners have access only to titled, state-owned land by means of long leases, many other texts contain references to the “acquisition” of land by foreigners, and some companies change nationality or use nominees for this purpose.
Madagascar has substantial fishery and aquaculture potential, and its shrimp and crab exports are significant. However, deep-sea fishing in Madagascar’s waters takes place under trading conditions which are favourable to foreign companies, in that there are no maximum catch limits. Reforms are needed in order to achieve sustainable management of resources while maximizing income from fisheries. Forest management has been affected by serious abuses, and the authorities have not yet succeeded in halting exports of rare timbers (palisander and rosewood), or of crocodiles and other wild animals, despite commitments made within CITES. The average level of protection of the agricultural sector (including plant, animal, fisheries and forestry production) is 14.1%, slightly higher than in 2008 (13.9%).
Provided that appropriate policies are introduced, the manufacturing sector offers exceptional opportunities, especially in the agrifood and handicrafts areas, because of Madagascar’s abundant flora and fauna, its rich waters and the wealth of Malagasy know-how. It is highly likely that growth in these areas will largely come from small-scale SMEs, as long as the State does away with the excessive, complicated and less than transparent taxation which is currently discouraging them from moving out of the informal economy. Industries, especially those which are export-oriented, are adversely impacted by the high taxes on businesses and cumbersome labour legislation, as well as by the difficulty of obtaining foreign currency to purchase inputs and the high rates of duty on the latter, long delays in the payment of VAT refunds, the high cost of customs controls and quality controls, burdensome export documentation requirements and, lastly, the requirement that a portion of earnings be repatriated and converted into the national currency.
The Free Zones and Enterprises (ZEF) regime, under which a large number of enterprises have registered (in many cases fictitiously), could provide a partial solution to the problem. The bulk of industrial investment in Madagascar would not have taken place without this regime, which offers all manner of generous benefits to investors that undertake to export, in principle, 95% of their production. However, as the regime is being widely abused it is a prime candidate for far-reaching reforms, with a view to better integration in the ordinary law regime.
During the period under review, significant progress was made in the area of trade reforms, especially as regards trade facilitation. Madagascar continues to grant at least MFN treatment to all its trading partners. It has never been involved as either complainant or defendant in a WTO dispute settlement process. The country has recently made remarkable efforts to update its WTO notifications; its WTO Reference Centre is operational, and local participation in WTO online training courses has increased significantly as a result. Madagascar is party to trade agreements covering around 50 trading partners, including COMESA and the SADC, the most recent of these being the interim Economic Partnership Agreement (EPA) between the EU and the Eastern and Southern Africa States, which entered into force in 2012. Madagascar grants duty-free entry to all its SADC and COMESA partners, on a non-reciprocal basis. Tariff reduction under the EPA began in January 2014.
There have been a number of tariff reductions, essentially on agricultural inputs, bringing Madagascar’s simple average applied (mainly ad valorem) MFN rates down from 13% in 2008 to 12.2% in 2015. However, less than one third of tariff lines are bound; a few of the applied rates exceed the bound level; and less than 6% of the applied tariff is zero-rated. Having lowered its customs duties, Madagascar would do well to resist the temptation to generate tax revenue from import and export flows by increasing the rates of other duties, as illustrated by the new excise duty on imported vehicles. Import taxes (levied internally and on entry), which account for more than half of tax revenue, still figure prominently in the government budget, and this is thwarting attempts to eliminate taxes on international trade.
Madagascar has been striving constantly since 2005 to improve its customs services. Since March 2015, minimum import values are reportedly no longer being used for customs valuation purposes. Significant progress has been made with the electronic Single Window, and the move towards paperless customs clearance procedures is very close to completion. The MIDAC System, an integral part of the Single Window, now allows several of the numerous control institutions required to approve import and export transactions to transmit their respective authorizations electronically to the Customs. However, work still remains to be done to ensure that the fees assessed actually reflect the services provided. Technical and financial assistance to upgrade the legislative and institutional framework for standards and technical regulations, such as sanitary and phytosanitary measures, seems essential, particularly in order to boost Malagasy exports.
Government procurement volumes fell sharply in 2009, probably owing to the sociopolitical crisis. Foreign sources of supply accounted for a mere 0.6% of total government procurement in 2013. Madagascar is neither a member nor an observer of the Plurilateral Agreement on Government Procurement concluded under WTO auspices. The country has nevertheless made significant efforts to be transparent by publishing its automated government procurement management system on the Internet.
The authorities are aware that any reform of trade policy will be ineffective if it is not underpinned by improvements in Madagascar’s sociopolitical system. These would involve, in particular, strengthening political and constitutional stability and ensuring the rule of law, enhancing the legal protection of persons, strengthening real-estate ownership rights and improving governance, including within the many state-owned enterprises. If these reforms are achieved, the Malagasy people, who have seen most of their social and economic indicators plummet over the past seven years, will have renewed cause for optimism.
Related News
Investing in women is vital to ending poverty, boosting needed growth
Closing persistent gender gaps is vital to boosting sustainable growth and ending poverty by 2030, World Bank Group President Jim Yong Kim said Tuesday, calling for scaled-up efforts to expand women’s access to good jobs, assets, and infrastructure.
“Economic growth is the most powerful tool we have for realizing a world free of poverty. The world economy needs to grow faster and more sustainably,” he told a panel in Addis Ababa alongside the Third International Conference on Financing for Development. “It needs inclusive growth that promotes opportunity for all, and that requires the full participation men and women.”
Aid targeting gender equality has risen in recent years, contributing to significant gains in health and education in many countries. But aid aimed at leveling the playing field for women remains low in what the OECD calls the “economic and productive sectors” of transport and storage, communications, energy, banking and business, industry, mining, construction, and trade.
Women’s jobs in these sectors are lower-paying and less secure. Globally, they still earn less, own less, run smaller businesses, employ fewer people, and create fewer jobs than men, and they remain vastly more vulnerable to poverty. They are also far less likely than men to have access to a bank account, mobile money provider, or other financial service, according to the latest Global Findex report. IFC, the Bank Group’s private sector arm, meanwhile estimates the annual financing and capacity gap facing women-owned small and medium enterprises in emerging markets at US$260 billion-$320 billion.
All of this adds up to a costly missed opportunity for women, families, and economies, research shows. The OCED estimates that on average, across its member countries, a 50 percent reduction in the gender gap in labor force participation along would boost GDP an extra 6 percent by 2030, with a further 6 percent gain if gaps closed entirely.
“When women earn more, public finances will improve and commercial profits increase because of increased demand and productivity,” President Kim said. “When we promote true equality – including equal pay for equal work – we all stand to benefit, because better educated mothers produce healthier children, and women who earn more invest more in the next generation.”
“We have fallen short in bringing women’s assets, earnings, and employment in line with those of men. This should galvanize us to arm ourselves with the best possible evidence about what works to close these gaps, leverage new partnerships and funding streams, and sharply scale up the smartest, most promising programs to meet these challenges.”
Along with other multilateral development banks (MDBs) and the IMF, the World Bank Group announced plans July 10 to extend more than US$400 billion in financing over the next three years and work more closely with private and public sector partners to mobilize the resources needed to achieve the historic new Sustainable Development Goals (SDGs).
To finance those goals, “collecting taxes fairly, efficiently, and transparently is critically important – in ways that don’t penalize women when they bring home a second income, for example, or spend money on food and other goods that sustain their families,” President Kim said. “So is government spending on the smartest possible investments that lift constraints and unleash the potential of all citizens. Foreign direct investment, bond issuance, and financing from institutional investors are also needed.”
The SDGs are ambitious and demand equal ambition in using the “billions” of dollars in current flows of official development assistance (ODA) and all available resources to attract, leverage, and mobilize “trillions” in investments of all kinds – public and private, national and global.
ODA, estimated at US$135 billion a year, provides a fundamental source of financing, especially in the poorest and most fragile countries. But more is needed. Investment needs in infrastructure alone reach up to US$1.5 trillion a year in emerging and developing countries.
The Bank Group is now concluding global consultations on a new gender strategy, to be launched in late 2015. Participants from government, civil society, and the private sector have stressed that along with healthcare and education, women need equal access to good jobs, training, financial resources, safe public transportation and other key infrastructure, and support in caring for others.
Related News
Secretary-General asks business to join forces with UN on Framework for financing global priorities
Meeting on Tuesday with CEOs, heads of state and ministers at a forum on the sidelines of a global finance summit, Secretary-General Ban Ki-moon called on the corporate community “to be our partners in supporting and financing this agenda.”
The call came on the second day of a global conference on “financing for development”, tasked with finding resources for a 17-point, 15-year plan on meeting human needs, protecting the planet and ending poverty. These Sustainable Development Goals will be up for final approval at the UN General Assembly in September.
“I urge private sector leaders – including CEOs and institutional investors – to be part of the solution, and to consider new commitments for investment in sustainable development,” the Secretary-General added, noting that the UN Global Compact, has rallied business behind these important issues and, with over 8,000 companies and 4,000 non-business stakeholders in 170 countries, it can “mobilize a global force of businesses for good.”
The 14 July International Business Forum attended by the Secretary-General was held at the Hilton Hotel in Addis Ababa, Ethiopia. In its morning session, more than 400 CEOs and business leaders heard addresses from H.E. Sam Kahamba Kutesa, President of the United Nations General Assembly; H.E. Hailemariam Desalegn, the Prime Minister of Ethiopia; Jim Yong Kim, President of the World Bank Group; and former basketball star Dikembe Mutombo, Chairman and President of the Dikembe Mutombo Foundation, Inc.
The Addis Ababa Action Agenda under negotiation represents a global consensus on a working relationship between private, philanthropic and public sectors, on addressing social justice and sustainable production and consumption, and on closing a yawning infrastructure gap.
However, the meeting takes place in a period of low expectations for global economic growth rates, weakened international trade, declining investment flows to developing countries, and persistent problems regarding debt, including in developed countries, noted both in the United Nations World Economic Situation and Prospects, mid-year update, 19 May, and the 9 July update to the World Economic Outlook of the International Monetary Fund.
A report of an intergovernmental committee of experts released last year said that lack of capital is not the issue, It cited estimates of “robust” annual global savings from private and public sources of $22 trillion, and of total global financial assets of about $220 trillion. Nevertheless, constraints on government budgets indicate a crucial role for the private sector and responsible business practices in helping to mobilize resources for pressing global needs.
The International Business Forum was organized by:
International Chamber of Commerce (Chair)
Columbia Center on Sustainable International Investment
European-American Chamber of Commerce
Foundation Center
Global Clearinghouse for Development Finance
International Finance Corporation
Principles for Responsible Investment
World Business Council for Sustainable Development
World Economic Forum
Women’s World Banking
United Cities and Local Governments
UN Global Compact
UN Foundation