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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:
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Participating providers of international support will collectively double their technical cooperation in the area of domestic revenue mobilisation and taxation by 2020;
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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
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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:
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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;
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Integrating partner countries into the global tax debate; and
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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
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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.
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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)
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
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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:
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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.
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Support institutions to facilitate domestic and foreign debt financing, including through bond issuance, and accessing international capital markets.
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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.
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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.
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Carefully weigh the benefits against the costs of borrowing, while allowing for the exchange rate risk that comes with borrowing in foreign currency.
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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.
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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.
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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.
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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
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UNCTAD: Investing in Sustainable Development Goals
Action Plan for Promoting Private Sector Contributions
The United Nations’ Sustainable Development Goals need a step-change in investment
Faced with common global economic, social and environmental challenges, the international community is defining a set of Sustainable Development Goals (SDGs). The SDGs, which are being formulated by the United Nations together with the widest possible range of stakeholders, are intended to galvanize action worldwide through concrete targets for the 2015-2030 period for poverty reduction, food security, human health and education, climate change mitigation, and a range of other objectives across the economic, social and environmental pillars.
Private sector contributions can take two main forms; good governance in business practices and investment in sustainable development. This includes the private sector’s commitment to sustainable development; transparency and accountability in honouring sustainable development practices; responsibility to avoid harm, even if it is not prohibited; and partnership with government on maximizing co-benefits of investment.
The SDGs will have very significant resource implications across the developed and developing world. Estimates for total investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year, for basic infrastructure (roads, rail and ports; power stations; water and sanitation), food security (agriculture and rural development), climate change mitigation and adaptation, health and education.
Reaching the SDGs will require a step-change in both public and private investment. Public sector funding capabilities alone may be insufficient to meet demands across all SDG-related sectors. However, today, the participation of the private sector in investment in these sectors is relatively low. Only a fraction of the worldwide invested assets of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is in SDG sectors, and even less in developing countries, particularly the poorest ones (LDCs).
UNCTAD proposes a Strategic Framework for Private Investment in the SDGs
A Strategic Framework for Private Investment in the SDGs addresses key policy challenges and solutions, related to:
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Providing Leadership to define guiding principles and targets, to ensure policy coherence, and to galvanize action.
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Mobilizing funds for sustainable development – raising resources in financial markets or through financial intermediaries that can be invested in sustainable development.
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Channelling funds to sustainable development projects – ensuring that available funds make their way to concrete sustainable-development oriented investment projects on the ground in developing countries, and especially LDCs.
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Maximizing impact and mitigating drawbacks – creating an enabling environment and putting in place appropriate safeguards that need to accompany increased private sector engagement in often sensitive sectors.
A set of guiding principles can help overcome policy dilemmas associated with increased private sector engagement in SDG sectors
The many stakeholders involved in stimulating private investment in SDGs will have varying perspectives on how to resolve the policy dilemmas inherent in seeking greater private sector participation in SDG sectors. A common set of principles for investment in SDGs can help establish a collective sense of direction and purpose. The following broad principles could provide a framework.
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Balancing liberalization and the right to regulate. Greater private sector involvement in SDG sectors may be necessary where public sector resources are insufficient (although selective, gradual or sequenced approaches are possible); at the same time, such increased involvement must be accompanied by appropriate regulations and government oversight.
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Balancing the need for attractive risk-return rates with the need for accessible and affordable services. This requires governments to proactively address market failures in both respects. It means placing clear obligations on investors and extracting firm commitments, while providing incentives to improve the risk-return profile of investment. And it implies making incentives or subsidies conditional on social inclusiveness.
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Balancing a push for private investment with the push for public investment. Public and private investment are complementary, not substitutes. Synergies and mutually supporting roles between public and private funds can be found both at the level of financial resources – e.g. raising private sector funds with public sector funds as seed capital – and at the policy level, where governments can seek to engage private investors to support economic or public service reform programmes. Nevertheless, it is important for policymakers not to translate a push for private investment into a policy bias against public investment.
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Balancing the global scope of the SDGs with the need to make a special effort in LDCs. While overall financing for development needs may be defined globally, with respect to private sector financing contributions special efforts will need to be made for LDCs, because without targeted policy intervention these countries will not be able to attract the required resources from private investors. Dedicated private sector investment targets for the poorest countries, leveraging ODA for additional private funds, and targeted technical assistance and capacity building to help attract private investment in LDCs are desirable.
When implementing IIA reform and choosing the best possible options for designing treaty elements, policymakers have to consider the compound effect of these options. Some combinations of reform options may “overshoot” and result in a treaty that is largely deprived of its basic investment protection raison d’être. For each of the reform actions, as well as their combinations, policymakers need to determine the best possible way to safeguard the right to regulate while providing protection and facilitation of investment.
» Read more in Investing in Sustainable Development Goals, Part 1
Reforming the International Investment Regime: An Action Menu
The IIA regime is at a crossroads; there is a pressing need for reform
Growing unease with the current functioning of the global IIA regime, together with today’s sustainable development imperative, the greater role of governments in the economy and the evolution of the investment landscape, have triggered a move towards reforming international investment rule making to make it better suited to today’s policy challenges. As a result, the IIA regime is going through a period of reflection, review and revision.
As evident from UNCTAD’s October 2014 World Investment Forum (WIF), from the heated public debate taking place in many countries, and from various parliamentary hearing processes, including at the regional level, a shared view is emerging on the need for reform of the IIA regime to make it work for all stakeholders. The question is not about whether to reform or not, but about the what, how and extent of such reform.
World Investment Report 2015 offers an action menu for such reform
WIR15 responds to this call for reform by offering an action menu. Based on lessons learned, it identifies reform challenges, analyses policy options, and offers guidelines and suggestions for action at different levels of policymaking.
IIA reform can benefit from six decades of experience with IIA rule making. Key lessons learned include (i) IIAs “bite” and may have unforeseen risks, therefore safeguards need to be put in place; (ii) IIAs have limitations as an investment promotion and facilitation tool, but also underused potential; and (iii) IIAs have wider implications for policy and systemic coherence, as well as for capacity-building.
IIA reform should address five main challenges:
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Safeguarding the right to regulate for pursuing sustainable development objectives. IIAs can limit contracting parties’ sovereignty in domestic policymaking. IIA reform therefore needs to ensure that such limits do not unduly constrain legitimate public policymaking and the pursuit of sustainable development objectives. IIA reform options include refining and circumscribing IIA standards of protection (e.g. FET, indirect expropriation, MFN treatment) and strengthening “safety valves” (e.g. exceptions for public policies, national security, balance-of-payments crises).
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Reforming investment dispute settlement. Today’s system of investor-State arbitration suffers from a legitimacy crisis. Reform options include improving the existing system of investment arbitration (refining the arbitral process, circumscribing access to ISDS), adding new elements to the existing system (e.g. an appeals facility, dispute prevention mechanism) or replacing it (e.g. with a permanent international court, State-State dispute settlement, and/or domestic judicial proceedings).
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Promoting and facilitating investment. The majority of IIAs lack effective investment promotion and facilitation provisions and promote investment only indirectly, through the protection they offer. IIA reform options include expanding the investment promotion and facilitation dimension of IIAs together with domestic policy tools, and targeting promotion measures towards sustainable development objectives. These options address home- and host-country measures, cooperation between them, and regional initiatives.
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Ensuring responsible investment. Foreign investment can make a range of positive contributions to a host country’s development, but it can also negatively impact the environment, health, labour rights, human rights or other public interests. Typically, IIAs do not set out responsibilities on the part of investors in return for the protection that they receive. IIA reform options include adding clauses that prevent the lowering of environmental or social standards, that stipulate that investors must comply with domestic laws and that strengthen corporate social responsibility.
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Enhancing systemic consistency. In the absence of multilateral rules for investment, the atomised, multifaceted and multilayered nature of the IIA regime gives rise to gaps, overlaps and inconsistencies between IIAs, between IIAs and other international law instruments, and between IIAs and domestic policies. IIA reform options aim at better managing interactions between IIAs and other bodies of law as well as interactions within the IIA regime, with a view to consolidating and streamlining it. They also aim at linking IIA reform to the domestic policy agenda and implementation.
WIR 2015 offers a number of policy options to address these challenges. These policy options relate to different areas of IIA reform (substantive IIA clauses, investment dispute settlement) and to different levels of reform-oriented policymaking (national, bilateral, regional and multilateral). By and large, these policy options for reform address the standard elements covered in an IIA and match the typical clauses found in an IIA.
A number of strategic choices precede any action on IIA reform. This includes whether to conclude new IIAs; whether to disengage from existing IIAs; or whether to engage in IIA reform. Strategic choices are also required for determining the nature of IIA reform, notably the substance of reform and the reform process. Regarding the substance of IIA reform, questions arise about the extent and depth of the reform agenda; the balance between investment protection and the need to safeguard the right to regulate; the reflection of home and host countries’ strategic interests; and how to synchronize IIA reform with domestic investment policy adjustments. Regarding the reform process, questions arise about whether to consolidate the IIA network instead of continuing its fragmentation and where to set priorities as regards the reform of individual IIAs.
When implementing IIA reform and choosing the best possible options for designing treaty elements, policymakers have to consider the compound effect of these options. Some combinations of reform options may “overshoot” and result in a treaty that is largely deprived of its basic investment protection raison d’être. For each of the reform actions, as well as their combinations, policymakers need to determine the best possible way to safeguard the right to regulate while providing protection and facilitation of investment.
» Read more in Investing in Sustainable Development Goals, Part 2
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tralac’s Daily News selection: 14 July 2015
The selection: Tuesday, 14 July
Making regional trade work for Africa: turning words into deeds (UNCTAD)
In its latest Policy Brief, UNCTAD identifies some of the barriers to implementing regional trade agreements in Africa and proposes remedial actions that may be taken by national Governments, development partners and regional institutions. A well-known characteristic of the regional integration process in Africa is the multiplicity of regional trade agreements (RTAs). There is recognition by African leaders that RTAs have enormous potential to foster regional trade and development in the region. However, the low rate of their implementation has left this potential largely locked up. To realize this potential, national Governments, development partners and regional institutions need to boldly and creatively tackle the drawbacks to effective implementation of RTAs. This policy brief identifies some of the main barriers to implementation and proposes remedies for them. [Download]
Selected updates from the FFD conference:
A comprehensive summary of presentations at Day One plenary sessions (UN)
President Macky Sall: 'Africa’s opportunity in Addis' (Project Syndicate)
Multilateral Development Banks to work more closely and with private and public sector partners
UNSG: Strong partnerships needed to turn billions into trillions for sustainable development
Harnessing innovative financing for nutrition in Africa (Common African Position)
Helen Clark: speech at launch of UNDP-OECD collaboration on ‘Tax Inspectors without Borders’ (UNDP)
Speech by DG Roberto Azevêdo (WTO)
The estimate for the value of unmet demand for trade finance in Africa is between 110 and 120 billion dollars. By bridging this gap we would unlock the trading potential of many thousands of individuals and small businesses across the continent. At the WTO, we have been working with regional development banks to support the creation and expansion of trade finance facilitation programmes. We are working together to close those gaps. And very soon we will be launching a new initiative with this goal in mind.
WTO members to start discussion of a possible cotton outcome in Nairobi (WTO)
WTO members exchanged views on a possible outcome on cotton at the Nairobi Ministerial Conference to be held in December, when they participated in a discussion aimed at enhancing transparency in relation to the trade aspects of cotton on 9 July. They also heard an update on the market situation and latest policy measures in cotton trade.
DR Congo signs the COMESA Regional Bond (COMESA)
The DRC has begun implementing the COMESA Regional Transit Customs Bond Guarantee. This follows the signing of the Inter Surety Agreement by the Director General of the DR Congo National Surety (Societe Nationale d'Assurances – (SONAS) Mrs Agito Amela Carole, Friday 10 July 2015. “The participation of SONAS in issuing one single Customs Bond for transit goods from the point of departure to destination sets the stage for the operationalization of Single Customs Territory between Congo D R and other COMESA Member States that are in the process of rolling out the CVFTS,” COMESA Secretary General Sindiso Ngwenya who witnessed the signing said.
Mozambique: Integrated Growth Poles Project (World Bank)
The Project Development Objective is to improve the performance of enterprises and smallholders in the Zambezi Valley and Nacala Corridor, focusing on identified high growth potential zones (growth poles). In the last six months project implementation has not advanced substantially due to weak procurement capacity and lack of a well-functioning and autonomous Project Coordination Unit (PCU) within the Ministry of Economy and Finance (MEF).
IGAD Ministers of Finance plead for the positive effects of remittances for the region (IGAD)
The objective of this Intergovernmental Authority on Development (IGAD) High Level Ministerial Roundtable Discussion on Remittance was to review the linkages between remittances, financing of development, and household food security in IGAD Member Countries with a view to formulating appropriate policies that enhance remittance contribution to local, national and regional economies and while protecting the remittance flows. The other objective is to assess the impact of challenges that Money Transfer Operators (MTOs), or remittance companies, especially after legislation in the US, UK and Australia made it increasingly difficult for people to transfer money to receiving countries. [Presentation]
Botswana: latest financial inclusion data (FinMark Trust)
50% of the population are banked, indicating an increase from 45% in 2009, while 39% use informal mechanisms to manage their finances. The percentage of those who do not have/use any financial products/services, neither formal nor informal is at 24% – these individuals save their money at home, and they rely on family and friends to borrow money. Financial inclusion is higher among adults residing in cities and towns (86%) compared to those living in urban villages (78%) and rural areas (64%). There is a higher rate of inclusion among males (79%) than females (73%). The study shows that Botswana ranks number 5 in the SADC region with regards to financial inclusion.
China buys US$3.5 billion of graphite extracted in Mozambique (MacauHub)
Graphite mining operations in Mozambique can now move ahead after Chinese companies signed long-term purchase contracts worth US$3.5 billion, according to the Economist Intelligence Unit. The most advanced of the projects underway is one run by Australia’s Triton Minerals in Nicanda (Cabo Delgado), already considered the world’s largest graphite reserve, which recently signed a contract with Chinese raw materials trading company Shenzhen Qianhai Zhongjin, securing financing of US$200 million. In addition to this financing, split into equity in the project and credit, the Chinese partner has committed to buying 200,000 tons of graphite in the long term.
Zimbabwe: Govt urged to stop cheap sugar imports (The Herald)
The future of nearly 20 000 workers employed in the Lowveld sugar industry is under threat owing to an influx of smuggled cheap sugar amid reports that over 50 000 tonnes of the commodity is being dumped into the country every year. Cheap low quality sugar is reportedly being smuggled into the country mainly from Malawi. The parliamentary portfolio committee on Land, Agriculture Mechanisation and Irrigation last Friday implored Government to stem the rampant smuggling of sugar and issuing of import licences to save the local multi-million sugar industry from collapse.
Speaking after a tour of the Lowveld, the committee said there was an urgent need to arrest the ongoing dumping of cheap and low quality sugar onto the local market. Zimbabwe produces about 480 000 tonnes of sugar every year against a local demand of 300 000 tonnes leaving the country with a surplus of about 180 000 tonnes. Some of the surplus sugar is exported but declining world sugar prices have left Zimbabwe short of international markets.
ZimTrade calls for removal of non-tariff barriers (The Herald)
Zimbabwe’s foreign trade promotion body, ZimTrade, says there is a need to streamline the country’s regulatory framework as part of critical steps in narrowing the $3 billion trade deficit. An outdated or improperly constituted regulatory framework can act as a barrier to effective trade. ZimTrade CEO Ms Sithembile Pilime said there was need for a complete review of the country’s regulatory structure to ensure that it is not inadvertently hindering the country’s exports.
Trade between Angola and Brazil totals US$2.371mn in 2014 (MacauHub)
Trade between Angola and Brazil totalled US$2.371mn in 2014, the Brazilian Agency for Export and Investment Promotion (Apex-Brazil) said Friday in a statement. Apex-Brazil also said that last year Brazilian exports to Angola reached US$1.261mn and imports of Angolan products totalled US$1.109mn, giving Brazil a trade surplus of US$152mn.
Tanzania: Forest ecosystems in the transition to a green economy and the role of REDD+ (UNEP)
Deforestation in Tanzania could cost the national economy 5,588 billion Tanzanian Shillings (US$3.5 billion, based on 2013 exchange rates) between 2013 and 2033 on current trends, highlighting the importance of investing in the forestry sector to alleviate poverty and boost growth, according to a new report. This based its analyses on the annual deforestation rate of at 372,816 hectares per year between 1995 and 2010, an estimate provided by the National Forest Monitoring and Assessment 2014.
SE4All expert report details concrete ways to boost finance for sustainable energy
The report by the Finance Committee of SE4All’s Advisory Board, ‘Scaling Up Finance for Sustainable Energy Investments’, identifies four broad ‘investment themes’ where action could help drive increased investment: developing the Green Bond market, using Development Finance Institutions’ de-risking instruments to mobilize private capital, exploring insurance products that focus on removing specific risks; and developing aggregation structures that focus on bundling and pooling approaches for small-scale projects. [Download]
Kenya dismisses Somalia suit in border dispute (Business Daily)
Kenya is confident of winning a court battle against Somalia which on Monday formally filed a complaint with the International Court of Justice over a long-running border dispute linked to lucrative oil and gas reserves in the Indian Ocean. Attorney-General Githu Muigai said the case filed by Somalia was “baseless and lacked the relevant backing of international law on maritime issues”.
Judges to combat money laundering, financing of terrorism (New Era)
Senior judges and magistrates from 13 out of 17 Eastern and Southern African Anti-Money Laundering Group Member States will gather in Swakopmund next week for a judicial retreat. The main purpose of the meeting will be to deliberate on issues related the effective and timely adjudication of civil and criminal matters involving money laundering, financing of terrorist activity and proliferation financing, including identification of assets, as well as freezing and forfeiture of assets obtained with the proceeds of crime. The retreat, scheduled for July 13 to 15, is the first of its kind to be held in Sub-Saharan Africa.
Tanzania to ratify African charter on statistics to influence policymaking (IPPMedia)
Tanzania will ratify the African charter on statistics chiefly to help identify underlying political economy issues related to the collection, analysis and use of data for policy-making. Deputy permanent secretary in the finance ministry, Prof Adolf Mkenda said yesterday that the government was committed towards ratifying the document that was initially signed early 2012. The document has been adopted by 16 countries in Africa with exception of the East African countries of Kenya, Tanzania, Uganda, Rwanda and Burundi. Delivering the key note speech at the opening of a joint regional workshop AfDB/SADC/COMESA and ECOWAS on GDP compilation in the framework of implementing the 2008 System of National Account, he said: “We will ratify the charter.”
Cecilia Malmström: 'Modernising trade policy - effectiveness and responsibility' (European Commission)
Nigerian entrepreneurs in Istanbul's textile markets (IMI)
Mega-projects approved for years are still not running in Mozambique - IESE (Club of Mozambique)
ECA, Germany, World Bank to launch new network of excellence on land governance (UNECA)
Ufa Declaration: the house that BRICS are building (Daily Maverick)
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Financing for Development Conference in Addis Ababa: Multilateral Development Banks to Work more closely and with private and public sector partners
The third international conference on Financing for Development opened on 13 July 2015 in Addis Ababa, Ethiopia. The opening plenary meeting was opened by the UN General Secretary, Ban Ki-moon. The African Development Bank (AfDB) was represented by Mrs. Geraldine Fraser-Moleketi, its Special Envoy on Gender.
The summit is to discuss new and innovative ways of soliciting funds to pay for the second generation of development programs known as sustainable development goals (SDGs). The SDGs, a UN-sponsored blueprint, has much wider and loftier ambitions than the Millennium Development goals (MDGs
During an earlier a meeting on 13 July, the Heads of the Multilateral Development Banks (MDBs) vowed to work more closely and with private and public sector partners to help mobilize the resources needed to meet the historic challenge of achieving the new initiative – Sustainable Development Goals (SDGs).
The keys points of discussions included:
- The SDG agenda is ambitious and will require significantly more resources than the MDGs. While the discussion during the MDGs was on aid and debt forgiveness, the conversation has now changed and is about what countries can do for themselves. Hence the focus is much more on domestic resource mobilization and creating an environment for crowding in private sector finance.
- Africa in 2015 is very different from the Africa at the turn of the century. With over a decade of sustained economic growth, Africa today has options which it did not previously have. More and more African countries are becoming creditworthy and accessing international capital markets – more than US$ 7 billion in 2014 alone. Similarly, African economies are increasingly financing their own development themselves through increased domestic revenues. During the last fifteen years, there has been a 4 fold increase in domestic revenues mobilized by African economies – in excess of $500 billion in 2015. That is ten times the amount of aid that Africa received in that year.
- The African Development Bank is at the center of this process of transformation and has a Ten Year strategy designed to meet the changing needs of the continent. The AfDB is innovating with new instruments, such as providing qualified ADF only countries with access to ADB resources; the creation of the Africa 50 Fund to scale up infrastructure financing; and an innovative exposure exchange with other multilateralism to leverage our balance sheet to scale up lending to North Africa, where we have high levels of exposure.
- In the coming years, MDBs will need to reevaluate the efficacy of their business models to make sure that they evolve with the changing needs of their clients in order for them to make sure that they remain true partners in development.
The group comprises African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, World Bank Group (referred to as the MDBs), and the International Monetary Fund.
» From Billions to Trillions: MDB Contributions to Financing for Development (PDF, 1.61 MB)
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Azevêdo urges UN’s Financing for Development summit to ‘close gaps’ in trade finance
Speaking at the opening session of the Third International Conference on Financing for Development in Addis Ababa on Monday 13 July, WTO Director-General Roberto Azevêdo outlined the major gaps which exist in the provision of trade finance, particularly in Africa and Asia, and the major impact that this can have on growth and development. He urged development partners to continue working together to help close these gaps.
The session was attended by UN Secretary General Ban Ki-moon, the President of the UN General Assembly, H. E. Sam Kahamba Kutesa, the President of the World Bank, Dr Jim Yong Kim, the Prime Minister of Ethiopia, Mr Hailemariam Desalegn, and many other heads of state and government, ministers and leaders of international organisations.
The Director-General said:
“Trade played a major role in the successful global effort to halve extreme poverty – and it can do a great deal more in the years to come. A range of policy measures are needed to make sure that the poor feel the full benefits of trade.
“We have identified trade finance as a key issue here. Up to 80% of global trade is supported by some sort of financing or credit insurance. But developing countries are still suffering from the consequences of the 2008 crisis. The supply of credit has not yet returned to normal levels. And so we are seeing big financing gaps, particularly in Africa and Asia.
“The estimate for the value of unmet demand for trade finance in Africa is between 110 and 120 billion dollars. By bridging this gap we would unlock the trading potential of many thousands of individuals and small businesses across the continent. The smaller the business, the bigger the gains.
“In Asia, the unmet demand for trade finance is estimated at over 1 trillion dollars. As a result, all too often, opportunities for growth and development are missed. Businesses are deprived the fuel they need to grow. And we are prevented from leveraging trade's full power as a source of development.
“We need to respond to this problem. At the WTO, we have been working with regional development banks to support the creation and expansion of trade finance facilitation programmes. We are working together to close those gaps and will be redoubling our efforts in the months ahead with a new initiative to achieve this goal.”
While drawing particular attention to the issue of trade finance, the Director-General also pledged his utmost personal support to the full post-2015 development agenda and detailed some of the practical elements of the WTO’s work which would help to deliver the forthcoming Sustainable Development Goals. These elements include the support provided by the Aid for Trade initiative, implementing all elements of the Bali Package, and delivering new outcomes for development at the WTO’s 10th Ministerial Conference in Nairobi this December – the first time the WTO has held such a conference in Africa.
His full statement is available here.
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SE4All expert report details concrete ways to boost finance for sustainable energy
Sees near-term potential to raise additional $120 billion a year by 2020
Innovative financial mechanisms in four key areas have the potential to boost crucial investment in sustainable energy by some $120 billion a year in the near term, an expert report from the Sustainable Energy for All (SE4All) initiative shows.
Investment from both the public and private sectors will need to triple to more than $1 trillion per year to meet SE4All’s ambitious goal of sustainable energy for all by 2030, according to latest estimates.
Developing countries face particular challenges in mobilising finance, ranging from investors’ risk perceptions and an inadequate pipeline of bankable projects, through to weaknesses in the regulatory framework and other basic conditions needed to set the stage for investment. Even in the developed world, investors can encounter regulatory and policy challenges in financing sustainable energy.
The report by the Finance Committee of SE4All’s Advisory Board, ‘Scaling Up Finance for Sustainable Energy Investments’, identifies four broad ‘investment themes’ where action could help drive increased investment:
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developing the Green Bond market;
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using Development Finance Institutions’ (DFIs’) de-risking instruments to mobilize private capital;
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exploring insurance products that focus on removing specific risks; and
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developing aggregation structures that focus on bundling and pooling approaches for small-scale projects.
Action across these four themes, along with mechanisms to speed up project development, could increase investment for sustainable energy in both the developing and the developed world by a total of some $120 billion a year towards SE4All’s three target areas of energy access, energy efficiency and renewable energy, the report says. It also calls for the development of a pipeline of bankable energy projects.
“These should not be the only areas of focus for SE4All, and do not address the total funding gaps identified. They do, however, represent near-term, achievable opportunities,” it says.
Of that total, the report sees potential to raise $35 billion through further expansion of the Green Bond market to drive fresh capital into new sustainable energy investments, particularly into the project bond market and asset-backed Green Bonds.
Developing tailored structures that allow the private sector to co-lend with DFIs in emerging markets could help raise a further $30 billion.
Encouraging new construction-stage lending, supported by subordinated debt credit enhancement instruments, and enabling later-stage flows from institutional investors could account for $30 billion, while developing structures to aggregate small-scale projects could catalyse $25 billion.
“A trillion-dollar investment need is also a trillion-dollar investment opportunity,” said Kandeh Yumkella, the UN Secretary General’s Special Representative for Sustainable Energy for All and CEO of the SE4All initiative. “This report shows in detail how we can start driving that investment in really practical ways, by mobilising new sources of finance and encouraging investors by helping them to manage their risks.”
“We know there is a diverse pool of investors wanting to finance sustainable energy projects across the world, but in many countries needing this investment, enabling environments are weak,” said Anita Marangoly George, Senior Director for Energy and Extractives for the World Bank Group. “As a global community, we must work hard to support governments with their reform efforts so that investors have the certainty they need. We can do this.”
The SE4All Finance Committee’s report is a major contribution to the debate on financing the post-2015 development agenda, which is the subject of the UN’s Third International Conference on Financing for Development (FfD3) running in Addis Ababa from 13-16 July. It was released at SE4All’s high-level side-event at the conference, on Financing Sustainable Energy for All.
The report was prepared for SE4All by Bank of America Merrill Lynch, the Brazilian Development Bank (BNDES) and the World Bank, with inputs from Finance Committee members from a broad range of governments, banks, businesses, inter-governmental agencies and civil society.
The 2015 edition of the SE4All Global Tracking Framework, released in May, estimates that annual investment in energy access will need to rise to $49.4 billion to reach the SE4All target of universal energy access by 2030, compared with current spending of $9 billion.
To double the share of renewable energy in the global energy mix will require investment of $442-650 billion per year, compared to the current baseline of $258 billion, while doubling the rate of improvement in energy efficiency will need $560 billion per year, against a current $130 billion.
Read the Secretary-General’s remarks at the event here.
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Making regional trade work for Africa: turning words into deeds
In its latest Policy Brief, UNCTAD identifies some of the barriers to implementing regional trade agreements in Africa and proposes remedial actions that may be taken by national Governments, development partners and regional institutions.
A well-known characteristic of the regional integration process in Africa is the multiplicity of regional trade agreements (RTAs).
There is recognition by African leaders that RTAs have enormous potential to foster regional trade and development in the region. However, the low rate of their implementation has left this potential largely locked up. To realize this potential, national Governments, development partners and regional institutions need to boldly and creatively tackle the drawbacks to effective implementation of RTAs.
This policy brief identifies some of the main barriers to implementation and proposes remedies for them.
Key points of the UNCTAD Policy Brief:
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The low rate of implementation of RTAs in Africa is a major obstacle to fully harnessing the potential of regional trade for development.
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Being realistic in terms of setting objectives and deadlines for targets in RTAs is a necessary condition for enhancing the implementation of commitments in Africa.
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Due to the overlapping memberships of regional economic communities in Africa, member States are faced with conflicting commitments, which make implementation challenging.
This policy brief draws heavily from the UNCTAD Economic Development in Africa Report 2013, subtitled Intra-African Trade: Unlocking Private Sector Dynamism.
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Strong partnerships needed to turn billions into trillions for sustainable development
Achieve the future sustainable development agenda and the goal of ending extreme poverty will require strong and creative partnerships to turn billions in official assistance into trillions in investments, the President of the World Bank Group stressed on Monday at an event on the sidelines of the United Nations conference on financing for development.
“Now is the time to translate the best ideas and expertise of all our institutions into action. To go from billions in official assistance to trillions in investments, we'll have to push even further our willingness to collaborate through creative partnerships,” said Jim Yong Kim.
Mr. Kim noted that official development assistance, which stands at about $135 billion a year, is the cornerstone of financing for development, especially in the poorest and most fragile countries.
“But now we have a responsibility to find new ways to leverage the generosity of donors and crowd in especially private sector financing. We must also stop illicit financial flows and increase domestic resource mobilization,” he told the audience.
“Only by doing all of these things together will allow us to leverage the billions of dollars in official development assistance to the trillions that we need. Tackling this challenge requires us to think creatively and collaboratively.”
The event, part of the Third International Conference on Financing for Development that opened on Monday in Addis Ababa, Ethiopia, follows the announcement last week by the multilateral development banks (MDBs) and the International Monetary Fund (IMF) to extend more than $400 billion in financing over the next three years.
They also vowed to work more closely with private and public sector partners to help mobilize the resources needed to meet the challenge of achieving the Sustainable Development Goals (SDGs) that countries will adopt in September at the UN.
“All the world is watching us in Addis to see if our aspirations and courage will match those of the nearly billion people who continue to live in extreme poverty today,” said Mr. Kim. “Only by doing so can we be the first generation in human history to end extreme poverty in our lifetime.”
Also addressing the event, Secretary-General Ban Ki-moon said the joint efforts of the World Bank Group and the regional development banks, working along with the UN system, will be “critical” to transforming the commitments in the Addis Ababa Action Agenda – the expected outcome of this week’s conference – into a vigorous global partnership for sustainable development.
Mr. Ban cited three areas where the efforts to turn billions into trillions will be most crucial, beginning with bridging infrastructure financing gaps, particularly in Africa. He also noted the clear call in the Addis Ababa Action Agenda for the financial institutions to promote regional integration, and cited the need to increase investments in addressing hunger and malnutrition, including in sustainable agriculture.
“The Millennium Development Goals have significantly advanced poverty reduction and social development,” he stated. “Now we must tackle the unfinished business of the MDGs, consolidate achievements and put our world on a more sustainable and equitable trajectory.”
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DR Congo signs the COMESA Regional Bond
The Democratic Republic of Congo has begun implementing the COMESA Regional Transit Customs Bond Guarantee (RCTBG). This follows the signing of the Inter Surety Agreement by the Director General of the DR Congo National Surety (Societe Nationale d'Assurances – SONAS) Mrs Agito Amela Carole, Friday 10 July 2015.
The RCTBG is a customs transit regime designed to facilitate the movement of goods under customs seals in the COMESA region and to provide the required customs security and guarantee to the transit countries.
With the signing, SONAS becomes part of a chain of National Sureties which issue the RCTBG also referred to as the COMESA Carnet. The RCTBG is also integrated in the COMESA Virtual Trade Facilitation System (CVFTS) which is already part of the National Bureaux that issue the COMESA Yellow Card and is a share-holder in Reinsurance Corporation, the ZEP-RE.
“The participation of SONAS in issuing one single Customs Bond for transit goods from the point of departure to destination sets the stage for the operationalization of Single Customs Territory (SCT) between Congo DR and other COMESA Member States that are in the process of rolling out the CVFTS,” COMESA Secretary General Sindiso Ngwenya who witnessed the signing said.
Further he said the implementation of the COMESA Carnet will reduce transaction costs and delays that are associated with different national regulatory requirements that entail the opening and cancellation of Customs Transit Bonds in each country.
In her remarks the Director General of SONAS thanked the Secretary General for the support and noted that the participation in the scheme by his organization would benefit not only the economy of DR Congo but of the region as a whole. The initiative is also part of the program of implementing the WTO Bali Agreement on Trade Facilitation.
Mrs Carole requested the Secretary General to assist with the training of SONAS Staff to ensure effective and efficient operations of not only the COMESA Carnet, but of the Yellow Card. She thanked the Secretary General for the support rendered to her country.
Mr Ngwenya thanked the Government of DR Congo for designating SONAS to issue the COMESA Carnet. He assured the Director General that in the coming weeks the COMESA Secretariat will deploy a Team in DR Congo to provide training to both the staff from SONAS and Congolese Customs in issuing and managing the COMESA Carnet through the CVTFS.
He further stated that ZEP RE will as is the case for other National Sureties provides re- insurance cover for the Single customs bonds issued by SONAS.
COMESA Director of Investment Promotion and Private Sector Development Mr. Thierry Mutombo attended was in attendance.
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EAC in drive to eliminate barriers to trade in services
Member states of the East African Community (EAC) appear to be racing against time to meet a self-prescribed deadline of December 2015 by which they pledged to have fully implemented the Common Market Protocol, which came into force on July 1, 2010.
The protocol, which was ratified by all five partner states of Burundi, Kenya, Rwanda, Tanzania and Uganda, provides for four freedoms within the region; free movement of goods; labour; services; and capital.
While the partners have done well with the other freedoms, there are sticky issues regarding certain provisions of the protocol that have made it hard to implement commitments to free movement of services and their providers; these require amendments.
With these gaps still in the protocol, it’s unlikely that member states will meet their December deadline with just five months remaining.
The 29th meeting of the Council of Ministers, held in September 2014 in Arusha, Tanzania, directed the EAC Secretariat to engage partner states in consultative dialogues involving various stakeholders to propose the specific amendments required to straighten the protocol.
Rwanda held its consultative meeting organised by the Ministry of East African Affairs (MINIEAC) during which they engaged members of the private sector who submitted their views on provisions of the protocol that they want amended or clarified.
The Minister for East African Affairs, Amb. Valentine Rugwabiza, told participants in the workshop that Rwanda was committed to work with its counterparts to seek practical solutions to enable easier cross border trade in services and to deepen regional integration.
“This exercise gives us a second chance to design a new framework and modus operandi of the EAC Common Market Protocol; a framework that is demand-driven and one that will yield maximum benefits to all,” she said.
John Bosco Kanyangoga, a lead integration consultant working closely with the Private sector Federation (PSF), says involving the private sector was the right thing to do as they’re the direct beneficiaries or victims of regional policies.
“We believe this exercise will generate an outcome that the private sector can own,” he said.
Those outcomes from the consultative meetings will be prepared as amendment proposals and presented to sectoral council of trade, industry, finance and investment to process.
What are the issues?
According to integration experts, the EAC common market protocol is one of the most ambitious regional integration agreements globally; naturally, this means it would also be one of the hardest to implement.
The sticky issues emanate from article 16 of the protocol which talks about free movement of services; member states guaranteed the free movement of services supplied by nationals of partner States and the free movement of service suppliers who are nationals of East Africa.
Although 12 components of services are listed in the protocol for liberalisation, partner states negotiated only seven and pledged to ‘progressively’ remove restrictions and allow full cross-border trading in those services by December.
They also pledged under Article 17 of the protocol to treat services and their suppliers from all other partner states equally and with no discrimination and pledged three forms of freedoms including movement of people (for non-economic reasons), service suppliers and workers.
In essence, the details of how countries were to implement the provisions on services are largely tied in complicated legalese that would make very little sense to an average service trader in the community.
Countries are at liberty to decide which services to open up to but even then, most of them haven't been satisfied by their own performance and put the blame to ‘technical errors’ in the text, which makes it hard to interpret or regulate.
A 2014 scorecard jointly conducted by several organisations, including the World Bank, gave the partners low scores on the component of service in trade; over 60 restrictions were found to be responsible for limited freedom for services trade.
Unclear definitions
Ramesh Chaitoo, an international trade expert who is currently consulting for the EAC Secretariat on how to clean up the sticky points of the protocol, said in a presentation at last week’s consultation workshop that the protocol, in its current form, doesn’t have a market access article or provision regarding services, which would shed some light on restrictions that are permissible or not in the CMP.
“The current lack of clarity could lead to difficulties in the implementation of partner states’ services commitments under the CMP,” said the expert.
In its current form, the protocol also doesn’t have regulations regarding the movement of service suppliers within the region.
Other errors are to do with unclear definitions of key terms in the protocol and their rights while on the move; for instance, the definition of service supplier and categories of service suppliers are not clear.
For instance, how many years of experience should someone have to qualify for a status of ‘contractual services supplier’ or ‘Independent service supplier? Or how long can a host country allow a ‘contractual services supplier’ or ‘independent service supplier’ to stay while away to give a service?
Should partner states include business visitors, intra-corporate transferees and graduate trainees in the categories of services supplier?
If you find these questions confusing, that’s because they are actually confusing and that is why partner states are reviewing the Common Market provisions to have them clearly answered, terms defined to ensure successful implementation of the protocol.
Why services?
Services are fast becoming the backbone for most EAC economies and a common market protocol that doesn’t facilitate their free movement would be seen as inconsequential to the region’s aspirations.
In Rwanda’s case, services constituted 48 per cent to gross domestic product in the first quarter of 2015 and the country envisages an annual sector growth of 13.5 per cent under the EDPRS II targets.
“To get to this level, we must relentlessly address any obstacles and also work with the private sector to unleash the potential in the services sector in the region,” said Minister Rugwabiza.
However, based on last year’s scorecard on how the region performed in implementing the common market protocol; the partners need to do more to spur intra-region trade in services.
A review of 500 key sectoral laws and regulations of the EAC found that at least 63 measures were inconsistent with the commitments that partner states made to liberalise services trade.
The review focused on professional services such as legal, accounting, architectural, and engineering; others were road transport, distribution (retail and wholesale), and telecommunications legislation.
Findings showed that professional services accounted for 73 per cent of the 63 identified barriers; engineering led the pack with 16 restrictions, 14 for accounting and 10 for legal services; 15 restrictive measures were found in road transport and only two in wholesale distribution.
The scorecard found that most restrictive measures to trade in services were in Tanzania with (17) and Kenya (16); Rwanda had eleven restrictions while Uganda had ten and nine for Burundi.
However, the researchers noted that Burundi’s strong performance on the scorecard is partly because most of its sectors are not yet regulated through region’s sectoral legislation.
Based on the scorecard, all partner states are guilty of non-compliance with the protocol and the scorecard recommended urgent reforms focused on liberalising legal restrictions and aligning partner states’ legislation with regional commitments.
According to Kanyangoga, those reforms are taking place, seen in the recent conclusion of several Mutual Recognition Agreements between professional bodies in the partner states including for legal and engineering services.
“There are clearly efforts to move in the right direction and the private sector appreciates that, with a clearer protocol, we can achieve more results,” he said.
The Common Market
A Common Market is a merger/union of two or more territories to form one common territory in which there is free movement of goods, labour, services and capital, and the right of establishment and residence.
The basic elements of a common market are:
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a smoothly functioning customs union including complete elimination of all tariff and non tariff barriers plus a Common External Tariff
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free movement of persons, labour, services and right of establishment and residence;
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free movement of capital within the Community
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enhanced macro-economic policy harmonisation and coordination particularly with regards to fiscal regimes and monetary policy.
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tralac’s Daily News selection: 13 July 2015
The selection: Monday, 13 July
Featured tweet, @kaushikcbasu: Tax revenue (central govt) as % of GDP (approx)
Featured tweets by @aeyakuze:
‘@MINEACRwanda: Did you know that Kenya set up 396 businesses in Rwanda btn July 2010 & Dec 2014’
‘@MINEACRwanda: In turn Kenya issued 411 to Rwandan nationals between July 2010 & December 2014’
EAC in drive to eliminate barriers to trade in services (New Times)
Member states of the East African Community appear to be racing against time to meet a self-prescribed deadline of December 2015 by which they pledged to have fully implemented the Common Market Protocol, which came into force on July 1, 2010. The protocol, which was ratified by all five partner states of Burundi, Kenya, Rwanda, Tanzania and Uganda, provides for four freedoms within the region; free movement of goods; labour; services; and capital.
While the partners have done well with the other freedoms, there are sticky issues regarding certain provisions of the protocol that have made it hard to implement commitments to free movement of services and their providers; these require amendments. With these gaps still in the protocol, it’s unlikely that member states will meet their December deadline with just five months remaining.
Financing for Development Conference: selected updates
UN conference opens with call for 'reboot' of development finance (UN News Centre)
Statement by Dr Nkosazana Dlamini-Zuma (African Union)
Positioning Africa in the Financing for Development Conference (Common African Position)
Min Zhu: 'Partnership, commitment and flexibility in Addis Ababa and beyond' (IMF)
Decent work and financing for sustainable development (ILO)
MDBs announce $400bn to achieve Sustainable Development Goals (AfDB)
Driving sustainable development through better infrastructure: key elements of a transformation program (Brookings)
The current infrastructure investment and financing model needs to be transformed fast if it is to enable the quantity and quality of growth that the world economy needs. The urgency of action cannot be overemphasized. Given the already high level of emissions, the next 15 years will be a crucial period and the decisions taken will have an enduring impact on both development and climate outcomes. The forthcoming U.N. Conference on Financing for Development at Addis Ababa in July provides a historic opportunity to reach consensus on a new global compact on sustainable infrastructure. To this end, the paper proposes six critical areas for action:
Financing the end of poverty (World Bank)
Global leaders are meeting July 13-16 at the 3rd International Financing for Development Conference in Addis Ababa, Ethiopia, to develop a financing plan for a new set of priorities – the Sustainable Development Goals (SDGs) – prior to a September meeting to agree upon those proposed targets. Will we see this (arguably more sensible) approach exceed what was achieved in Monterrey in 2002? At stake is nothing less than financing an end extreme poverty in our generation.
Donald Kaberuka: 'The EiB - an effective implementing partner for European Development Policy' (Friends of Europe)
7th BRICS Summit: Ufa Declaration
BRICS Ufa Action Plan
The Strategy for BRICS Economic Partnership
Memorandum of Understanding on Cooperation with the New Development Bank
World needs more development banks like BRICS’, not ‘mindless austerity’ – minister (RT)
BRICS is gaining momentum as an increasingly effective organization and its New Development Bank is likely to become new source of funding for the current infrastructure gap, South Africa’s Trade and Industry Minister Rob Davies told RT.
$100 billion BRICS lender more keen on risk than World Bank (Bloomberg)
“We do need another development bank but of a different kind,” Mboweni said. The BRICS nations, who are all members of the World Bank, “have nevertheless also found that there are problems with the World Bank group. We want to take on the riskier infrastructure projects and other development projects, but there may be cases where we have to work together.”
Egypt’s textile industry threatened by temporary ban on cotton imports (Ahram)
Tuesday’s decision by Egypt's agriculture ministry to temporarily ban cotton imports, it says to protect domestic cotton production, is stirring fears among experts that the country's own textile industry may end up paying the price. The decision dictates that all imported cotton will not be allowed in the country for an indefinite period of time, excluding imports shipped before 4 July.
According to the government, it intends to protect and improve marketing for domestic cotton production, and “defend the interests of cotton producers, manufacturers and exporters”. However, in a country where textile manufacturing is highly dependent on imported short-staple cotton, a crop rarely grown in Egypt, the decision has sparked fears of a backlash on the domestic spinning and weaving industry.
Lakshmi Mittal asks for South Africa govt's assistance to counter losses (Economic Times)
With his company's operations in South Africa running into losses, Steel magnate Lakshmi Mittal has sought South African government's intervention to counter cheap Chinese imports and asked for an imposition of a 10 per cent import duty on steel, according to a media report. The weekly Sunday Times reported that Mittal was in the country last month to brief the government, including President Jacob Zuma, on a possible rescue assistance, failing which his company ArcelorMittal South Africa ..
Tanzania: Cashew nut stakeholders call for more govt support (Daily News)
Cashew nut stakeholders in the country have asked the government to intensify support to industries processing the crop by addressing critical challenges. Cashewnut Board of Tanzania (CBT) Processing Manager, Simuli Yahaya speaking at a stakeholders' meeting here over the weekend, mentioned some of the challenges as shortage of processing equipment like boilers, driers, shelling and packaging machines.
Zimbabwe: Food imports continue to grow (The Herald)
Processed food imports have surpassed the $1bn mark each year from 2012 negatively contributing to the trade deficit, which reached $3,4bn last year. Bankers Association of Zimbabwe president Mr Sam Malaba said processed food imports contribute a significant part of the current account deficit. Presenting a paper on Containment of Inflationary Pressures on Food Prices and Funding of the Entire Value Chain at the inaugural Zimbabwe Food Conference Expo, Mr Malaba said the major driver of overall inflation deceleration has been food inflation; now in consecutive decline for over a year. “Local firms in the food sub sectors increasingly face thinning margins against the background of intense competition from imports. Processed food imports constitute a dominant share of the manufactured imports; in excess of $1,1bn per year since 2012,” said Mr Malaba.
AfDB Board approves African Natural Resources Center Strategy for 2015-2020
The Strategy is intended to operationalize the Center by spelling out the Center’s strategic approach to assisting governments in their management of the opportunities and challenges of natural resources management (NRM). The Strategy proposes two pillars, namely: a) integrated natural resource development planning to protect the environment through sustainable development; and b) good governance of natural resources to support negotiations, local content and transparency through public participation. In respect of the value chain, the focus of the Center’s work will be on upstream natural resources management.
Peter Drysdale: 'Realising India's economic potential' (editorial comment, East Asia Forum)
In this week's lead essay, Alok Sheel, economic advisor to the government in the state of Kerala and former head of the prime minister's advisory council, points to the 'long shadow' between ideas and reality in Indian policy making. While it may turn out as many in India now claim, he says, that India's 'manifest destiny' is to overtake China and become the fastest growing major economy and a world power, unless India successfully introduces productivity reforms and opens its markets, this 'destiny' will remain a pipe dream.
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Driving sustainable development through better infrastructure: Key elements of a transformation program
The agendas of accelerating sustainable development and eradicating poverty and that of climate change are deeply intertwined. Growth strategies that fail to tackle poverty and/or climate change will prove to be unsustainable, and vice versa.
A common denominator to the success of both agendas is infrastructure development. Infrastructure is an essential component of growth, development, poverty reduction, and environmental sustainability.
The world is in the midst of a historic structural transformation, with developing countries becoming the major drivers of global savings, investment, and growth, and with it driving the largest wave of urbanization in world history. At the same time, the next 15 years will also be crucial for arresting the growing carbon footprint of the global economy and its impact on the climate system.
A major expansion of investment in modern, clean, and efficient infrastructure will be essential to attaining the growth and sustainable development objectives that the world is setting for itself. Over the coming 15 years, the world will need to invest around $90 trillion in sustainable infrastructure assets, more than twice the current stock of global public capital. Unlike the past century the bulk of these investment needs will be in the developing world and, unlike the past two decades, the biggest increment will be in countries other than China.
Getting these investments right will be critical to whether or not the world locks itself into a high- or low-carbon growth trajectory over the next 15 years. There is powerful evidence that investing in lowcarbon growth can lead to greater prosperity than a high-carbon pathway.
At present, however, the world is not investing what is needed to bridge the infrastructure gap and the investments that are being made are often not sustainable. The world appears to be caught in a vicious cycle of low investment and low growth and there is a persistence of infrastructure deficits despite an enormous available pool of global savings. At the same time, the underlying growth trajectories are not consistent with a 2 degree climate target. And climate change is already having a significant impact, especially on vulnerable countries and populations.
Yet there are major opportunities that can be exploited to chart a different course. The growth potential of developing countries can be harnessed to boost their own development and global growth and demand. Long-term interest rates are at record lows and there are major untapped sources of finance. Technology change offers prospects for breakthroughs on development and climate outcomes (smart cities, distributed solar power). And there is growing recognition of the importance of decarbonization and new commitments to it by advanced countries as well as developing countries.
The current infrastructure investment and financing model needs to be transformed fast if it is to enable the quantity and quality of growth that the world economy needs. The urgency of action cannot be overemphasized. Given the already high level of emissions, the next 15 years will be a crucial period and the decisions taken will have an enduring impact on both development and climate outcomes. The forthcoming U.N. Conference on Financing for Development at Addis Ababa in July provides a historic opportunity to reach consensus on a new global compact on sustainable infrastructure. To this end, the paper proposes six critical areas for action:
First, there is a need for national authorities to clearly articulate their development strategies on sustainable infrastructure. These strategies need to address the still considerable opportunity for improvements in national policy in key infrastructure sectors, such as urban development, transport, and energy. There is a need for stronger institutional structures for investment planning and for building a pipeline of projects that take into account environmental sustainability from the outset, and greater capacity to engage with the private sector.
Second, the G-20 can play an important leadership role in taking the actions needed to bridge the infrastructure gap and in incorporating climate risk and sustainable development factors more explicitly in infrastructure development strategies. The G-20 can do this through their own actions and investment strategies and by supporting global collective actions such as the development of norms for sustainable procurement and unlocking both public and private pools of finance. The Global Infrastructure Forum proposed in the draft Addis Accord can build on the G-20 and other initiatives to create a global platform for knowledge exchange and action.
Third, the capacity of development banks to invest in infrastructure and agricultural productivity needs to be substantially augmented in order for them to pioneer and support changes needed for better infrastructure. In our view, MDBs will need to increase their infrastructure lending five-fold over the next decade, from around $30-40 billion per year to over $200 billion, in order to help meet overall infrastructure financing requirements. Several MDBs have taken steps and are actively considering options to enhance their role and capacity. The establishment of new institutions and mechanisms also creates the opportunity for greater flexibility and scale. Nevertheless, a more systematic review of the role of MDBs and needed changes could help strengthen their individual and collective roles and garner support from shareholders and other stakeholders.
Fourth, central banks and financial regulators could take further steps to support the redeployment of private investment capital from high- to low-carbon, better infrastructure. We already see progressive action from the Bank of England and the French government. Market-developed standards for instruments such as green bonds could also increase the liquidity of better infrastructure assets.
Fifth, the official community (G-20, OECD, and other relevant institutions) working with institutional investors could lay out the set of policy, regulatory, and other actions needed to increase their infrastructure asset holdings from $3-4 trillion to $10-15 trillion over the next 15 years. This could include publishing project pipelines, standardizing contracts, providing government-backed guarantees for investments in sustainable infrastructure, and making longer-term policy commitments in terms of tax treatment of infrastructure investments. “Impact capital” – capital that is willing to take lower ex ante returns in exchange for significant reductions in policy risk is growing rapidly and could make a significant contribution.
Sixth, over the coming year the international community should agree on the amounts of concessional financing needed to meet the SDGs, how to mobilize this financing and how best to deploy it to support the economic, social, and environmental goals embodied in the SDGs. ODA can play a critically important role in crowding in other financing and in enhancing the viability of infrastructure projects. Beyond ODA, targeted climate finance, when combined with the much larger pools of private and non-concessional public financing, could offset additional upfront costs of low-carbon investments in both low- and lower-middle income countries and help build more resilient infrastructure and help adapt to climate change. The Green Climate Fund (GCF) is a first possible step around which such a new approach can be built.
We know the main elements of the transformation agenda, although many details have to be worked out. They are entirely compatible with both sustainable development and climate goals. The aim is not to put in place complex and burdensome structures but responsive and flexible mechanisms capable of learning and bringing about real change. Working together across the Financing for Development, SDG, G-20, and UNFCCC processes, there is an opportunity to drive real change over the next 12 months.
Achieving better infrastructure outcomes will require concerted actions on many fronts. But moving from a business-as-usual approach to better infrastructure can dramatically affect global outcomes on both development and climate.
The Brookings Global Working Paper Series examines and analyzes some of the most pressing development and economic challenges facing the world. Series topics range from macroeconomics, international relations, global development and environmental economics. The working papers are intended to make the results of research by Brookings scholars available to other economists and researchers in preliminary form to encourage discussion and suggestions for revision before publication.
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Financing the end of poverty
Global leaders are poised to adopt a set of targets tackling the world’s biggest challenges.
These targets include the ambitious goal of ending extreme poverty in a generation. Leaders meeting in Addis Ababa will discuss how to ensure the goals are adequately financed.
The Millennium Development Goals – a set of eight international targets – were established in 2000 at the UN Millennium Summit. It took another two years for there to be a conference on how to actually finance them. Now, with the MDGs coming to a close this year, the international community is poised to plot a different course.
Global leaders are meeting July 13-16 at the 3rd International Financing for Development Conference in Addis Ababa, Ethiopia, to develop a financing plan for a new set of priorities – the Sustainable Development Goals (SDGs) – prior to a September meeting to agree upon those proposed targets.
Will we see this (arguably more sensible) approach exceed what was achieved in Monterrey in 2002? At stake is nothing less than financing an end extreme poverty in our generation.
“The decisions taken in Addis next week – and in New York in September – have the potential to benefit billions of people for generations to come,” said World Bank Group President Jim Yong Kim.
“But it’s going to take more than business as usual. We need far greater collaboration among governments, the private sector, civil society and multilateral development institutions, including new partners like the Asian Infrastructure Investment Bank and the New Development Bank.”
The global development landscape has changed since the MDGs were adopted in 2000. Middle-income countries now account for a much larger share of global GDP. At the same time, inequality within many countries is on the rise and the gap between the rich and the poor is growing. Moreover, the private sector is playing an increasingly important role in financing goods, service and infrastructure in emerging economies – accounting for $778 billion in foreign direct investment in 2013.
The conference is the capstone to a year of collaboration between the World Bank Group, regional multilateral development banks (MDBs) and the International Monetary Fund (IMF) to identify areas where they can work together or develop new initiatives that will help finance the post-2015 development agenda.
“The world needs an ambitious plan for financing,” says Bertrand Badré, managing director and World Bank Group chief financial officer.
“We need to radically rethink how we unlock resources and connect the billions of dollars in official development assistance (ODA) to trillions in investment of all kinds, public and private, national and global.”
The global community provides roughly $135 billion a year in official development assistance, according to the Organisation for Economic Co-operation and Development (OECD). But the SDGs are ambitious, and the cost of achieving them will far exceed current development funding. The price tag for even the most basic of needs – such as clean water – is far beyond the reach of existing public resources.
“The billions in ODA – a small but critical part of overall development flows – must be used more strategically to catalyze and channel additional development resources,” says Mahmoud Mohieldin, corporate secretary and the World Bank Group president’s special envoy to the UN.
“Channeling additional flows to support the SDGs will be a challenge,” he adds. “We can’t expect private and public resources to automatically join forces to support the SDGs.”
The largest potential sources of finance for development come from countries themselves and private investors. International financial institutions such as the World Bank Group can help countries get the money they need for development through better tax policies, more efficient public spending, and private investment.
“Historically, we’ve done a good job of having public capital finance public projects and private capital invest in private companies. What we need to do now is blend public and private together,” said Gavin Wilson, Chief Executive Officer of IFC Asset Management Company, which mobilizes institutional investor capital to invest in IFC projects. As of June 30, 2015, AMC raised $8.5 billion in assets under management across nine funds.
The World Bank Group is exploring ways to use its own platforms to generate greater flows, provide policy and technical guidance, promote private investment, support international action on regional and global development issues, coordinate more closely than ever with existing partners and explore ways to bring on board new partners.
The development banks and the Bank Group will issue information notes that outline areas of greater cooperation, initiatives that should be expanded, and new platforms for disseminating knowledge and providing technical assistance.
“If we seize this moment, we can accomplish the greatest achievement in human history – to end extreme poverty in a generation,” says Kim.