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EAC Secretary General’s Private Sector CEO Forum held in Dar
The Secretary General of East African Community, Amb. Dr. Richard Sezibera has assured Chief Executive Officers of Private Businesses and Business Leaders/Owners in Tanzania that the governments in the region were determined to do away with non-tariff barriers (NTBs) that continue to present a serious challenge to regional trade and integration in East Africa. He said NTBs account for a significant proportion of the high transportation costs, which are estimated to be 60-70% higher than in the U.S. or Europe, and 30 percent higher than in Southern Africa.
Amb. Sezibera, who was speaking at the breakfast meeting with Tanzania’s Private Sector CEOs and leading Business Owners held on 14 May 2015 at the Hyatt Regency Dar es Salaam, The Kilimanjaro, said “in March this year, the East African Legislative Assembly (EALA) passed a law that will compel Partner States to eliminate barriers and end protectionism that had hindered smooth trade. The object of the Bill, which was moved by the Council of Ministers, is to provide a legal mechanism for the elimination of identified non-tariff barriers (NTBs) in Partner States and the Bill now awaits assent by the Summit for it to become operational.
The Secretary General informed his guests that due to the growing portfolio of the EAC projects and programmes, and also in order to diversify the EAC resource base and cut on donor dependency, there was need for the Community to tap into the potential funding from the private sector through the establishment of an EAC Private Sector Fund.
Amb. Sezibera informed Tanzania’s business community that the ongoing initiative to set up a $20 Million EAC Private Sector Fund was to boost the participation of the private sector in the ongoing market integration. “The idea behind the fund is to see how we can ensure that the private sector plays a bigger role in the integration of EAC. The fund will be used to address various challenges facing the private sector within the EAC” disclosed the EAC official.
The Chair of East African Business Council Mr. Felix Mosha commended the Council of Ministers for the appropriate decisions it continues to make towards the improvement of the business environment in the EAC region including the approval of the Consultative Dialogue Framework, which has facilitated consultations with the East African private sector to be institutionalized.
He also commended the East African Legislative assembly for passing the EAC Elimination of Non-Tarrif Barriers (NTB Bill) which is expected to significantly reduce the number of NTBs in the region and enhance the realization of the EAC integration benefits.
The Chair of EABC drew the attention of the Secretary General on a number of outstanding issues that need to be addressed and they include; fast tracking implementation of the Single Custom Territory so that the intended benefits can be realized by removing unfair competition and encourage efficiency and competitiveness in EAC.
There is also the need to strengthen the capacity of the National NTBs Monitoring Committees to enable them conclude their tasks more efficiently for the benefit of all EAC members states.
On the list is also the need to expedite harmonization of domestic, excise, income and value added taxes and harmonization of product standards. The harmonization of product standards at the regional level is very slow and the adoption of approved EAC product standards at national level is very slow and the capacity of institutions charged with this responsibility needs to be enhanced. “It is also important that we work together to develop regional quality mark and an EAC regional technical regulations framework”.
On air transport, the EABC Chair reiterated the urgent need for the Partner States to liberalize the EAC airspace as a matter of urgency to facilitate trade competition in the region. “It is ironic that air fares between EAC capital cities are higher than a round trip between these cities and Dubai or even close to the fare to North America” stated Mr. Mosha.
He urged for the expedition of the adoption and operationalization of the EAC Air Transport Regulations; harmonization of regulatory fees and charges in the region in order to have a level playing field and enhance competition for the air operators in the region; and the provision of national treatment to EAC national air operators, passengers and cargo in all EAC Partner States.
The Chair of EABC urged the Business CEOs and Leaders in the region to actively participate in the first-ever EAC Manufacturers Summit scheduled for September 2015 in Kampala, Uganda. The forum is expected to deliver key recommendations for improving and expanding East Africa’s manufacturing sector through among other measures including strategic linkages with both Agriculture and banking sectors.
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Where does the world stand in reaching Sustainable Energy objectives?
The world is on the right track to make sustainable energy a reality for everyone by 2030, but that can only happen if countries dramatically accelerate their efforts and have access to the latest technology and additional investments, according to a report launched on Monday 18 May.
“Progress Toward Sustainable Energy: Global Tracking Framework 2015” gives a snapshot of how far the world has come in achieving universal access to modern energy, doubling the global rate of improvement in energy efficiency and doubling the share of renewable energy in the global energy mix and shows how much work remains to reach these objectives.
So what happened to global access to electricity between 2010 and 2012?
There have been notable advances in electrification – driven primarily by India – but progress in Africa remains far too slow.
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Annual growth in access to electricity reached 0.6 percent, approaching the target growth rate of 0.7 percent required to reach universal access by 2030.
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222 million people gained access to electricity. As a result, the share of global population with access to electricity rose from 83 to 85 percent, and the number of people without access to electricity declined from 1.2 billion to 1.1 billion.
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125 million people got access to clean cooking fuel. But 2.9 billion people still use biomass fuels like wood and dung – most of them clustered in rural areas of Sub-Saharan Africa, South Asia and eastern Asia.
Global energy efficiency between 2010 and 2012:
Progress in reducing global primary energy intensity was substantial, though still only two-thirds of the pace needed to reach the Sustainable Energy For All (SE4All) objective.
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The annual rate of efficiency improvement, as measured by primary energy intensity, equaled 1.7 percent over the tracking period, considerably more than in the base period 1990-2010. Still, the rate of improvement is much slower than the SE4All objective of an average annual 2.6 percent improvement between 2010 and 2030.
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Avoided using 20 exajoules of energy in 2012 – more than Japan used that year.
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Electricity transmission and distribution losses are falling, and many countries are using more-efficient gas-fired plants.
Global renewable energy consumption between 2010 and 2012:
The growth of renewable energy final consumption continued to accelerate, but the rate of progress will need to increase over 50 percent to achieve the SE4All objective.
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The share of renewables in the global energy mix grew from 17.8 percent in 2010 to 18.1 percent, but still falls short of the 0.89 percentage point increase needed to achieve the objective.
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Annual growth of modern renewable energy consumption (which excludes solid biofuels used for traditional purposes) stood at a rate of 4 percent. Still, that rate must be 7.5% to attain the objective with modern renewables.
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Annual volume of renewable energy consumption increased to 2.9 exajoules, or the equivalent of Pakistan or Thailand’s energy consumption in 2012.
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Renewable energy technologies accounted for half of all capacity additions. Lower technology costs, especially with solar photovoltaic cells, helped as well.
There are substantial gaps, but the good news is that they can be closed if the right steps are taken:
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Annual global investments in energy will need to scale up three times to as much as $1.25 trillion. Of that, between $40 billion and $100 billion annually is needed to achieve universal access to electricity. Universal access to modern cooking fuels, by contrast, requires just $4.3 billion a year.
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Countries with lower capacity will need access to state-of-the-art clean energy technology and associated knowledge.
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Better understanding the link between energy and other key sectors such as water, agriculture, gender and health is critical to achieving sustainable energy goals.
Downloads:
» Summary Report (PDF, 5.55 MB)
» Key Findings (PDF, 3 MB)
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Africa must open up to Africa, says Uhuru
Kenyan President Uhuru Kenyatta has urged African governments to open their borders, trade with each other and reduce dependency on foreign aid.
Speaking at the Pan African Parliament in Midrand, Kenyatta told members of the house that the continent's potential could be realised only if African governments worked together and made it easier to trade with each other.
“There cannot be a good reason why it is easier for us to trade with Asia, Europe and the Americas rather than our own fellow Africans. We have ended up as a source of raw materials. This must come to an end. Africa must use her resources to create jobs for our own young people.
“Africa must significantly open her markets to African products to promote this ideal. That process can only be achieved if we start by opening up our borders to each other,” Kenyatta said.
He called for governments to significantly reduce the cost of inter-Africa trade and to forge partnerships which would take the continent into a new industrial development.
Partnerships have started to emerge in East Africa.
This process began in July 2000 with Kenya, Tanzania, Rwanda, Uganda and Burundi. This community undertook to establish a customs union, common market, monitoring union and a political federation. The customs union is already in place and the common market goal is gradually being achieved.
“Despite our individually small economies, the integration has placed the entire region on a trajectory of growth that will fundamentally transform Africa,” Kenyatta said.
East African countries are also planning to partner in infrastructure projects that will support trade, reduce telecommunication costs and standardise tuition fees for member states.
But a threat to this development is the resurgence of terrorist groups, in particular Boko Haram and al Shabab.
“For us in Kenya, terrorism matters and vulnerability in this regard makes it imperative to forge close ties with our neighbours and to be attuned to developments relating to this threat in other parts of the world.
“The radicalisation of young people extends beyond national or even continental borders. This fluid challenge requires unfailing solidarity between our states.”
Kenyatta also announced that Kenya would be the second country after Mali to sign a protocol that will see the Pan African Parliament becoming a legislative body.
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Improving non-oil export with EEG scheme review
For serious economies, local incentives that will assist exporters of value-added products in managing their operational costs and ensuring maximal business profits as well as returns for government are developed and effectively managed. For value-chain drivers in the country, accessing the Export Expansion Grant (EEG) within the last two years after it was suspended for review remains elusive. With outgoing administration failing to recommence the suspended scheme as promised, there are recurring questions on government’s commitment to industrial rebirth with the EEG scenario, especially at a time when economic diversification is essential.
In today’s economy, it is believed that growth will come from private enterprises, from businesses, from industrial investing, designing, manufacturing, exporting and expanding frontiers.
To make this growth achievable, government has a role – to clear the barriers to expansion, by critically examining every policy to ensure it doesn’t act as a brake on recovery.
Though, sustainable, long-term growth – in manufacturing or elsewhere – is one that will not be achieved overnight, the need to encourage innovation and investment across a much wider range of industrial sectors has been brought to the fore in recent times.
For instance, the practice of exporting raw agricultural produce has been described as one undermining industrial growth and a contradiction to government’s commitment on revival of activities in the real sector.
Although, common trade economics shows that it makes more business sense to invest in extraction than manufacturing, the resultant effect is a nation deeply entrenching the competitive advantage of other economies. This has further led to a situation where there is a competitive advantage in extraction of primary goods but not in the making of secondary goods.
To this end, manufacturers and stakeholders in the value-addition process have called on the federal government to revisit incentivised manufacturing to encourage investors in the value chain process.
Recently, the Nigerian Export Promotion Council (NEPC), unveiled plans to recommence the suspended Export Expansion Grant (EEG), under a new regime from January 2015.
The revival of the scheme, according to the Chief Executive officer of NEPC, Segun Awolowo, was scripted to promote value-addition industry especially in the agricultural sector.
The suspension of the EEG scheme by government for almost two years has generated several criticisms from agro-processors and players in the value-addition sector, describing it as a disincentive and elixir to raw commodities’ exportation.
The Export Expansion Grant (EEG) until now remains the only functional incentive of all instruments introduced by government to encourage exporters of non-oil products immensely essential.
The scheme was introduced as a form of buffer for those who export non-oil products from Nigeria so that they could be encouraged to expand their production base, add more value and foray into new markets. With the Grant, exporters are entitled to certain percentage of their turnover so that they could continue in business.
The incentive was also introduced bearing in mind that Nigeria’s infrastructure and business climates are not particularly healthy for business.
Indeed, manufacturers in Nigeria are more of local governments in their own rights because they have to get their own water, their own light, construct their own road and then face numerous government agencies after they might have finished production.
Awolowo had noted that the EEG, which will take off in January 2015, has been designed to encourage exporters of raw materials to become local processors.
With various commodities markets opening up for export, the ability of Nigerian exporters to exploit these markets hinges on their ability to compete effectively and profitably.
For instance, with global demand for chocolate confectioneries experiencing a surge, propelled by the emerging markets of India and China, stakeholders in Nigeria’s cocoa sector have sought new synergies and strategies to get a significant share in the estimated $80 billion market.
Similarly, textile and apparel manufacturers are also being encouraged to take advantage of business opportunities from the global market, which according to statistics, is expected to hit $850 billion this year.
Chief of Party, NEXTT, Alf Monaghan, noted that it was time for the government and the private sector to pay more attention to the global market trends given Nigeria’s potential to be a global hub of cocoa products.
Monaghan pointed out that Nigeria, currently the fourth largest cocoa producer in the world after Ivory Coast, Ghana and Indonesia is losing market due to factors including small farm size, demographics, productivity and age of farms.
Awolowo had stressed that Nigeria’s first step towards actualising a significant global market share was to produce more cocoa.
“We need to increase our production of cocoa and from there, make improvements in the value chain by increasing value addition. More factories should be established to produce made in Nigeria chocolate, while we drastically cut down on the export of raw cocoa,” he said.
“We support the Nigerian Industrial Revolution Plan (NIRP) and with the proposed Cocoa Corporation Board which we are all in support of, that will make it easier for stakeholders to come together and share information on cocoa. While the Board will be funded by the government, the private sector will be allowed to drive its activities,” he said.
For instance, stakeholders within the cocoa industry, under the aegis of Cocoa Processors Association of Nigeria (COPAN) have decried government’s inability to encourage processors through the poor implementation of protectionist policies, especially the Export Expansion Grant (EEG).
According to them, exporters of raw cocoa beans are receiving undue government patronage at the expense of the economy, while creating undue competition against companies in the value-addition process.
For stakeholders in the agro-allied sector, there are complaints concerning government’s apathy towards reviving the EEG scheme.
Indeed, members of the sector who are exporters, have relied on the policy renewal announced by the Federal Government , in the form of EEG and NDCC to plan their investments and make their pricing decisions.
National Chairman of Federation of Agricultural Commodity Association of Nigeria, FACAN, Victor Iyama said: “We fail to understand how on one hand the Federal Government is regularly paying subsidy on fuel together with interest and exchange rate adjustments while on the other hand it is refusing to allow utilization of NDCCs which have been signed by the Finance Ministry and disbursed to the exporters as a “legal tender”. It appears that because our members have been patient and they are being subjected to continued neglect.
“The EEG Policy Review which has been in the works since the commencement of this administration is yet to be completed. We believe that non-oil exports is a critical issue at this juncture for this country. We urge you to kindly ensure that appropriate details are shared with the transition committee so that the incoming administration would be assisted to complete this process at the soonest.
“Our prayer is for the Federal Government o treat EEG claims with same seriousness as other subsidy payments like fuel, fertilizer etc, as non-oil exporters should not be subjected to an inferior treatment; approve and release the EEG claim files pending for Finance Ministry approval for over a year; announce a set schedule for redemption of NDCCs, perhaps 5% of total outstanding NDCCs each month so that exporters can plan and organize their cash flow and business operations; advise the NEPC to continue with processing of EEG claims submitted to them which are pending for processing”.
Chairman of the association, Dimeji Owofemi noted that value addition to raw cocoa has been decreasing due to dearth of protectionist policy for such effort while export of raw beans continues unabated.
According to him, it will be enough if the government stops giving incentives to those exporting the raw material because the raw material is a core element.
Hitherto, the Managing Director of Sam & Sara Garment Factory, Folake Oyemade, explained that the ineffective implementation of the EEG scheme has undermined the company’s export potential.
According to her, Sam and Sara is one of the few companies in Africa that took advantage of the African Growth and Opportunity Act (AGOA).
She noted that tonnes of uniforms are being exported from Nigeria to America under its brand name, Impreza.
“Though the profit is still marginal because of the exchange rate and other factors, like government’s inadequate protectionist policy through the Export Expansion Grant (EEG) scheme, we are optimistic that the trade condition will improve, more so if the Nigerian government recognizes the benefits of building local industry using the instrument of friendly taxation.”
“But for the Bank of Industry (BOI) that offers a reasonable interest on loan and encourages local entrepreneurs, the interest rate in commercial banks in Nigeria is outrageous,” she said.
It is believed that if emerging economies like Nigeria continue to grow at the pace that they have in recent times, hundreds of millions of new middle-class consumers will be created, providing an expanding market for high value goods and services. Hence, incentivised schemes are key – export enterprise finance guarantees, working capital, bond support and foreign exchange credit support – to help more industries expand their trading horizons.
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Ethiopia plans export hubs with $10 billion factory parks
Ethiopia is targeting $1 billion of annual investment in industrial parks over the next decade to boost exports and make it Africa’s top manufacturer, a special adviser to Prime Minister Hailemariam Desalegn said.
The government may invest half of the $10 billion needed for zones across the country that will house textile, leather, agro-processing and other labor-intensive factories, Arkebe Oqubay said in an interview in the capital, Addis Ababa. The International Finance Corp., the World Bank’s private lending arm, along with Chinese and European lenders and private-equity funds are interested in projects, he said.
“In terms of industrial development and manufacturing development, we want to put Ethiopia number one in Africa,” Arkebe said in Addis Ababa.
Growth in Ethiopia has surpassed every other sub-Saharan country over the past decade and is forecast by the International Monetary Fund to exceed 8 percent over the next two years. The state-planned economy is opening up to foreign investors following its sale of $1 billion of Eurobonds last year and plans to start an equities and secondary debt market, London-based Exotix, which has a buy rating on the Eurobonds, said May 7.
Ethiopia’s manufacturing industry is valued at about $1.35 billion, compared with $48.1 billion in South Africa, according to World Bank data.
Calvin Klein
American clothing company Phillips-Van Heusen Corp., which owns the Tommy Hilfiger and Calvin Klein brands, is considering using suppliers at an industrial park in Hawassa, south of Addis Ababa, the government said last month. Hennes & Mauritz AB, Europe’s second-largest clothing retailer, already sources from three factories in Ethiopia, where wages can be as little as a tenth of China’s and access to the U.S. market is duty free under the African Growth and Opportunity Act.
Ethiopia had targeted a 15-fold increase in textile and leather exports to $1.5 billion in a five-year plan that finishes in July, the end of the country’s fiscal year. That surge didn’t take place because of a lack of specialized parks with services including utilities, banks, customs and transport links, said Arkebe, who is chairman of the state-run Industrial Parks Development Corp.
Total manufacturing shipments earned $262 million in the first eight months of this fiscal year, up 10 percent from the previous year. Investing in industrial parks will be “a major solution to the problems,” Arkebe said.
200,000 Jobs
The government will use about half of the funds from the Eurobond to develop parks in the financial year that begins July 8, he said. The government’s so-called Vision 2025 sees manufacturing expanding 25 percent a year and creating employment for 200,000 Ethiopians annually, Arkebe said.
The World Bank is spending $250 million on a second industrial zone at Bole Lemi, on the edge of Addis Ababa. In October, Shin Textile Solutions Co. of South Korea moved into the existing factory park at Bole Lemi, employing 3,000 people, Arkebe said.
A textile park opened in Hawassa in April and construction begins this month on zones in Dire Dawa and Adama, which are both on Ethiopia’s main trade route to a port in neighboring Djibouti, according to Arkebe. Kombolcha and Mekele will also be manufacturing centers. The industrial park plans need to be endorsed by federal lawmakers who will be voted for in May 24 elections, he said.
Chinese Funding
Electric railways costing $4 million per kilometer will serve the environmentally friendly parks, which will be “almost” rent free for private developers and will include tax incentives, said Arkebe.
One project connecting Addis Ababa with the cities of Jimma, Bedele and Ambo began last week. Chinese banks will “mainly” finance the 491-kilometer (305-mile) rail link, he said. Another railway from a port in the Djiboutian town of Tadjourah port to Bahir Dar city and from the capital south to the cities of Awassa and Arba Minch will be completed by July 2020, Arkebe said.
Separately, the government says a Chinese-funded track from Addis Ababa to Djibouti will be completed this year. Work is also continuing on a $1.7 billion line that goes through Kombolcha, funded by the Export Credit Bank of Turkey and Credit Suisse Group AG.
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tralac’s Daily News selection: 18 May 2015
The selection: Monday, 18 May
This 2015 Outlook’s thematic chapter will focus on regional development and spatial inclusion. It takes an analytical perspective at how the continent’s demographic pressures combined to the growth of cities pose important challenges and opportunities, while bringing forward innovative approaches to better tap the assets of African regions and secure the continent’s transformation by 2050. The report will be launched on the 25th May.
Chad minister favourite for AfDB presidency (Daily Monitor)
Pedro Pires: 'For the next president of the AfDB, I offer Cristina Duarte, candidate of the times' (The East African)
Global investment trends monitor (UNCTAD)
Investment activity by TNCs from the South increased by 30% in 2014, reaching a record level of US$48bn (excluding transition economies and offshore financial centres in the Caribbean). Among developing regions, TNCs from Asia, Latin America and the Caribbean increased their investment abroad, while those from Africa reduced theirs. Developing Asian TNCs for the first time became the world's largest investors, accounting for almost one third of the total. Investments from Africa decreased by 21% in 2014 to US$11bn. South African TNCs invested in telecommunications, mining and retail while those from Nigeria focused largely on financial services. Intra-African investments rose significantly during the year.
AU Ministers of Trade: statement by Commissioner for Trade and Industry
The Commission has secured approximately $18m for the period 2016-2017, excluding in-kind technical assistance from different Partners (the African Trade Policy Centre, the Trade Advocacy Fund, etc.). We remain grateful to our generous partners who have stepped in to support this critical agenda. Allow me to seize this opportunity however, to strongly urge Member States to support the establishment of the CFTA by making provision for resources for its negotiations. This must be an African owned and led agenda, and it does not reflect well for it to be entirely financed by our generous partners. I would like to mention that, among the most important factors for the success of the CFTA are:
Tripartite opportunity (The Independent)
Though Amelia Kyambadde, Uganda’s minister of trade, industry and cooperatives is positive, other experts are not very excited yet. Kyambadde told The Independent on May 9 that the FTA, which will be transformed into a common customs union at a later stage, presents opportunities for Uganda and this is in terms of a wider market for local commodities and labour. The FTA, she argues, would also build and present more clout for the members in future since they would be able to “stand up” to the more powerful global trading States and blocs like the US, China and the EU during trade negotiations.
Lower barriers raise EAC status (The East African)
With 2014 being a pivotal year for landlocked developing countries and small island developing States, UNCTAD, through its mandated work programme in the field of transport and trade logistics, intensified its work on addressing the unique transport and trade logistics challenges facing these two vulnerable groups. In carrying out its work in the field of transport and trade facilitation, UNCTAD recognizes the multiplicity of stakeholders and therefore emphasizes the importance of promoting greater coordination and consultation within and between Governments, as well as with key stakeholders such as the transport industry and trade community.
Nacala: Japan grants US$280m loan to Mozambique (MacauHub)
Japan has granted an additional US$280m loan to Mozambique to be applied in the second phase of the project to expand Nacala port, per terms of an agreement signed on Thursday in Maputo, the Mozambican press reports. The loan is the last instalment granted by Japan for the project to develop Nacala port. In 2012 it granted US$30m and in 2013 a further US$70m, making for an overall total of US$380 million.
Africa’s infrastructure spend to hit $180b by 2025 (The Nation)
Swaziland: 9.1% decline forecast in sugar net payable prices (Swazi Observer)
The ongoing and further projected decline in sugar prices from the country’s major markets is set to have a negative impact on the local industry. As a result the Swaziland Sugar Association (SSA) has forecast a 9.1 percent reduction in net prices payable to its members in the coming season. In an interview, SSA Chief Executive Officer Dr Mike Matsebula revealed a combination of factors that provisionally threatened the viability of the industry.
South Africa: Itac applies cement duties on Pakistan (Business Day)
The International Trade Administration Commission of SA has imposed provisional anti-dumping duties of between 14.29% and 77.15% on Pakistani cement imports, up to and including November 13. This comes about 10 months after cement producers representing the industry in the Southern African Customs Union submitted an application to Itac saying they are suffering "material harm" from Pakistani cement dumping. "Pakistan’s exports to its traditional markets are declining and imports from Pakistan into Sacu increased more than 600% between 2010 and 2013," Itac said on Friday.
Chamber of Mines comes to members’ defence (Business Day)
There are potentially very serious repercussions for offshore-listed South African mining companies in the brewing battle over the differing views between the government and the industry on empowerment and compliance with the Mining Charter. In an unusually muscular response, the Chamber of Mines on Friday challenged the Department of Mineral Resources’ interpretation of the results of an audit of its members’ empowerment credentials and the consequent ministerial castigation of the sector’s transformation efforts over the past decade.
South Africa: statement by Inter-Ministerial Committee on Migration (GCIS)
Since the advent of democracy in our country, we have taken a very progressive approach to migration. We need a more focused approach to manage migration. Issues of migration management have been the sole responsibility of the Department of Home Affairs. However, as we move forward, we will be including all of Government in developing a new integrated migration policy to address our challenges in a collaborative and integrated manner. This process will further ensure the effective participation of stakeholders such as civil society and foreign national organisations in managing migration into our country.
Mozambique, Tanzania extend, scrap entry visas (StarAfrica)
Mozambique and Tanzania on Sunday signed a Visa Waiver Agreement on diplomatic, service and ordinary passports extending to 90 days the period of stay in the territory of each country against the previous 30 days of the initial agreement. According to Mozambican Interior Minister Basilio Monteiro, the agreement aims to make more fluid cooperation by facilitating the free movement of people and goods in both countries because there is an understanding in this sense at the level of the Southern African Development Community.
Smuggling destroying economy: CZI (NewsDay)
The country’s “porous” ports of entry have remained the major driver of low industrial capacity utilisation and subsequent loss of potential revenue to the national fiscus, the Confederation of Zimbabwe Industries has said. Outgoing Midlands CZI president Ben Mashangu told NewsDay last week that revenue leakages at the ports of entry were worsening the country’s deficit, a development that Finance minister Patrick Chinamasa acknowledged in his 2015 National Budget statement. “Our border posts are porous, we all know that. The country is not only losing lots of revenue through tax leakages, but the fraudulent influx of goods into the country has, and is, destroying our local industry. We can’t really talk of high capacity utilisation when cheap goods are being smuggled into the country on a regular basis, we need to promote our local industries first,” he said.
Smugglers limit tax revenues for Uganda (East African Business Week)
The government is losing over $4 million due to illicit trade of tobacco products on the local market British American Tobacco Uganda (BATU) told a news conference recently. During the tobacco company’s Annual General Meeting, the company’s managing. Danson Mwaura said Uganda is a hub for illicit tobacco products.
Zimbabwe: Gold output up in Q1 (The Herald)
Gold production registered a 25 percent growth in the first quarter of the same period last year to boost the mining sector’s growth for the period to $452 million in value terms. Chamber of Mines chief executive officer Mr Isaac Kwesu said the first quarter is looking better than the comparative period last year. He said coal had registered a 55 percent increase followed by nickel which jumped by 5 percent. The gold sector has particularly performed much better considering that it recorded a 2,1 percent decrease in the first quarter of 2014.
Dar investors acquire 51pc stake in Kenyan bank (Business Daily)
A group of Tanzanian investors has acquired a majority stake in a Kenyan bank in the first significant entry of Dar into the competitive local banking space. A disclosure note by lawyers Coulson Harney revealed the identity of investors behind M Holdings, who received a go-ahead from the Competition Authority of Kenya (CAK) to acquire 51 per cent of Oriental Bank, as shareholders of Bank M Tanzania.
Nairobi, Johannesburg stock markets to cross-list securities (Business Daily)
Cost of imports to rise on new EAC levy (Business Daily)
The cost of imports looks set to rise with the planned introduction of a one-per cent levy on goods coming outside the East Africa Community to fund the regional bloc’s budget. In the budget speech made to the East African Legislative Assembly last week, the levy was the only highlighted option among various choices for funding the regional budget. Currently, the budget is mainly funded by donors.
Today’s quick links: Kenya, South Africa enter bilateral negotiations (CapitalFM) EAC cross-border payments credited (East African Business Week) Rwanda: Disparities in implementation of tax incentives irk manufacturers (New Times) NIRP to boost yearly manufacturing revenue by N5tr, says Aganga (The Nigerian Guardian) Johnnie Carson: 'Strategies to reset the frayed US-Nigeria relations' (Premium Times) Nigerian undergoes second Peer Review (Premium Times) China's Position Paper on the Post-2015 Development Agenda (Common African Position) India: Exports fall for fifth straight month (LiveMint) Janet Yellen is now taking a back seat to China (LiveMint) Peter Drysdale: 'Getting trade and currency policy instruments and objectives mixed up' (East Asia Forum) |
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Developing Asia now invests more abroad than any other region, UNCTAD report says
Countries in developing Asia have, for the first time, collectively invested more money abroad than countries in the North American and European regions, the latest UNCTAD Global Investment Trends Monitor says.
Hong Kong (China) and China were the second and the third largest investors in the world, after the United States which remains the largest single source of outward foreign direct investment (FDI). Among the 20 largest investors, nine were either from developing or transition economies.
In addition, in 2014 transnational corporations (TNCs) from developing economies alone invested almost half a trillion US dollars abroad − a 30% increase from the previous year.
This UNCTAD trends monitor analyses the most recent trends in global outward investment and assesses its prospects for 2015. It covers outward FDI trends in developed, developing and transition economies.
An in-depth analysis of global, regional and sectorial trends will feature in the forthcoming World Investment Report 2015, to be published in June 2015.
Highlights
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In 2014, transnational corporations’ (TNCs’) share in global foreign direct investment (FDI) reached a record of 36%, up from 12% in 2007, the year prior to the financial crisis (see figure 1).
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Developing Asia has become, for the first time, the world’s largest investor region with US$440 billion invested, followed by North America (US$390 billion) and Europe (US$286 billion).
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In 2014, Hong Kong (China) and China were the second and the third largest investors in the world, after the United States. Among 20 largest investors, nine were either from developing or transition economies.
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Investments by developed country TNCs were largely flat at US$792 billion, with the modest rise in flows from North America and Europe more than offset by a 16% decline in Japanese investment abroad.
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More than half of investments from TNCs based in developing economies were in equity, while as much as four-fifths of FDI outflows from developed country TNCs were in the form of reinvested earnings − the result of record amounts of cash reserves in their foreign affiliates.
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The value of cross-border merger and acquisitions (M&As) surged to US$399 billion in 2014 − 28% above 2013 levels. Megadeals dominated the scene in 2014. TNCs from the South continued to acquire developed country foreign affiliates in developing world.
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Announced greenfield investment projects rose by only 7% reaching US744 billion. The increase was driven mainly by investments from TNCs of the South. Greenfield investors from developed countries, however, account for a larger share (66%).
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UNCTAD estimates that TNC investment appetite will improve, encouraged by better economic prospects, especially in the United States, proactive monetary policy in the Eurozone and the large cash holdings of companies. However, TNCs remain guarded due to the fragility in some emerging markets, exchange rate volatility and increased geopolitical tensions.
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Lower barriers raise EAC status
Continued investments in trade infrastructure as well as the dismantling of bureaucratic and procedural barriers to economic integration is positioning the East African Community (EAC) as the destination of choice for doing business.
Senior officials from consultants, TradeMark East Africa (TMEA) were last week launching their annual report covering the period 2013/2014. Recently they did the same for Uganda a couple of weeks ago.
TMEA is the lead advisor for improving trade flows across the region.
Partnership between TMEA and the East African governments has been described as vital in achieving the great progress in delivering seven key One Stop Border Posts (OSBP) across East Africa this year.
This has helped increase physical access to markets for both formal and informal traders.
Nelson Karanja, the TMEA Communications Manager said pilot operations at the Kobero/Kabanga between Tanzania and Burundi borders already indicate a two-day reduction in transit times at Kabanga for cargo trucks.
There has also been a reduction in tedious formalities for traders which previously had an adverse impact on time and costs of business.
Karanja was giving a presentation in an event which was officiated by Tanzania’s Permanent Secretary (PS) in the Ministry of East Africa Cooperation Joyce Mapunjo.
George Lauwo, Director in Tanzania’s Ministry of East African Cooperation, who represented the PS, expressed appreciation of TMEA work in East Africa and Tanzania in particular.
He reiterated that the government was very pleased with the partnership with TMEA, who continue to work with partners in the region to reduce trade costs in the region.
“Significant progress has been made on reducing non-tariff barriers in the region with the support of an innovative and world winning SMS based system developed by the Tanzania Chamber of Commerce and Industry. Similarly improvements at the Dar port have started taking shape to make it a world class port and facilitate trade for the greater Eastern African region,” Lauwo said.
The report revealed among others details of TMEA’s vision of enhancing interconnectedness in the region through trade by highlighting some of the successful projects they have supported.
Notable among these is the recent signing of the Mombasa Port Community Charter, witnessed by Kenya’s President Uhuru Kenyatta by 25 government and private sector agencies who committed to support initiatives that will increase efficiency at the Mombasa Port and the Northern corridor.
TMEA Tanzania Country Director Dr. Josaphat Kweka said some of the key results included a reduction of average time to clear goods at Mombasa port and transport them to Kampala to four days.
There has been a reduction in the number of customs declarations by 90% leading to an increase in trade volumes. An example is that of fuel imports into Uganda which have increased from 32.1 million litres to 108 million litres today.
Kweka said the results point to an ever improving trade environment which is expected to spur investments and ultimately benefit the citizens of the East Africa region.
“TMEA is playing an important role as a catalyst in mobilizing around $600 million at Dar es Salaam Port to improve its performance through better infrastructure and port operations. Our partnerships at both Mombasa and Dar ports involve an innovative approach mixing both hardware and software solutions,” he said.
According to Kweka, more importantly, TMEA has made strides to support informal trade across borders, which is often the lifeline of most rural livelihoods and since these traders do not use available formal systems and structures for their transactions, it is difficult for regional trade policy initiatives to have any significant impact on their lives.
He said there is therefore a continued effort to ensure these economically disadvantaged populations have access to markets.
What TMEA has done, is facilitate the formation of cooperatives for informal women traders which have enabled them educate their members, access finance as a group, and engage formally with border officials.
The report however highlights the challenges TMEA faced. Many were of an external nature such as increased threats of violence and terrorism.
However TMEA hope to see a 10% increase in the total value of exports from the EAC and a 25% increase in intra-regional trade exports when compared to total exports in the region by 2016.
TMEA is a non-profit organisation supported by several multilateral institutions.
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Meeting of AU Ministers of Trade: Statement by H.E. Fatima Haram Acyl, Commissioner for Trade and Industry
Opening Statement for the Meeting of AU Ministers of Trade by H.E. Fatima Haram Acyl, Commissioner for Trade and Industry African Union Commission on 14 May 2015, Addis Ababa
We are here today, in the last stretch, to come to an agreement on strategic principles that will guide negotiations leading to the establishment of the Continental Free Trade Area (CFTA), which is as you know, a flagship project of the African Union’s Agenda 2063.
Since 2011 following the Kigali meeting, tremendous work by yourselves, your Commission and its partners, has gone into preparations for the forthcoming launch. That work led to demonstrating to our Heads of State and Government that the time was ripe for Africa to move its regional agenda forward, and hence in January 2012 the historic and bold decision was taken. That was possible because our leaders believe in the potential of the CFTA to unleash substantive benefits for Africa’s socio-economic growth and development. Its establishment will significantly boost intra-African trade and investment, making it easier to move goods, services, and people around the continent. It will support sustainable development, create jobs and empowering women, as well as strengthening the geopolitical position of Africa vis-à-vis the rest of the world.
As we prepare for the CFTA negotiations, allow me to say that the Commission is fully cognizant of the diversity of Member States – some are landlocked countries, others small island developing states, a majority less developed economies, a number of fragile economies and others resources rich. All of them bring enriching attributes that are vital to the CFTA processes. But this diversity also brings with it some challenges in forging common positions – hence the purpose of negotiations. Trust me, the CFTA negotiations will not be easy, will consume enormous amounts of our energies, efforts and resources – financial, time and human. But with good will, nothing is impossible especially that there is no alternative option to reach our development objectives. I would urge that we engage in the common spirit of “Together as one AFRICA” – where disagreements are tolerated, agreements can be struck and compromises can be made for the common and collective good without compromising the endearing unity that our continent so strongly needs.
You will recall that CAMOT 9, held in December 2014 agreed on the Institutional Arrangements for the CFTA negotiations and that Your Excellencies further directed that technical preparations be undertaken together with the mobilization of technical and financial resources to enable the Commission to facilitate the negotiations for the CFTA.
I am happy to announce that, in response to your request, the Commission has secured approximately US $ 18 million for the period 2016-2017, excluding in-kind technical assistance from different Partners (the African Trade Policy Centre, the Trade Advocacy Fund, etc.).
We remain grateful to our generous partners who have stepped in to support this critical agenda. Allow me to seize this opportunity however, to strongly urge Member States to support the establishment of the CFTA by making provision for resources for its negotiations. This must be an African owned and led agenda, and it does not reflect well for it to be entirely financed by our generous partners.
I would like to mention that, among the most important factors for the success of the CFTA are:
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The diversification of our economy through inclusive and sustainable industrial development and value addition to our raw materials.
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Paying a particular attention to harmonize and support the standards and quality of our products for market access and enhancing their competitiveness.
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Moving forward with the implementation of the BIAT Action Plan, especially the cluster on Trade Facilitation as well as the WTO Trade Facilitation Agreement.
I also believe that it is critical that we consider the establishment of the CFTA not in isolation, but within the context of ongoing developments around the globe. The multilateral trading system is changing. Many of the largest countries in the world, and Africa’s most significant trading partners, are moving towards the establishment of Mega-Regional Trade Agreements (MRTAs). These include the Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP), and the Regional Comprehensive Economic Partnership (RCEP). Research and the impact of these agreements on Africa: We will be better positioned and better off if we move to establish the CFTA as quickly as possible.
Since we last met, there have been important developments related to the reauthorization of AGOA as well. In January, a delegation led by the Honourable Minister of Lesotho travelled to the United States to lobby on AGOA. Just last month, a high-level delegation, which included Her Excellency the Chairperson, the Deputy Chair, and several Commissioners, including myself, met with Secretary of State John Kerry and Members of the US Congress, US Businesses and Civil Society, and of course the African Group in Washington, to further engage on this same agenda. I can tell you that currently a bill has been introduced to Congress, which includes an extension of 10, rather than 15 years, as we had requested. It also includes some new provisions towards improvements and some less favourable for some countries. I believe it is critical that your meeting discuss and come up with a common understanding on this new bill.
As you are aware, this meeting also represents the last opportunity we may have to meet before the 10th WTO Ministerial Conference (MC10), set to take place in December in Nairobi. We rejoice that this event will be hosted in an African country. We should use this unique opportunity to strategize on the role of Africa within the multi-lateral trading system, including recent developments at the WTO. It is important that, as this will be the first WTO Ministerial Conference to be held on the Continent, Africa must come out with one strong voice and position on issues of critical importance to the continent, and that we do our best to ensure that this is one of the main outcomes of MC10.
While several important and unresolved issues remain after 5 days of thoughtful deliberations by Senior Officials and trade experts, it is your responsibility as Ministers of Trade to address the pending issues, finalise the critical documents towards the launch of the negotiations and guide the June Summit accordingly through a draft decision and declaration.
I wish you all fruitful deliberations over the next two days and I thank you for your kind attention.
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Disparities in implementation of tax incentives irk manufacturers
Manufacturers have decried the way tax incentives offered by the Rwanda Development Board are being implemented by the Rwanda Revenue Authority (RRA).
The Rwanda Association of Manufacturers (RAM) and industrialists says though they are given some tax incentives when registering their businesses, RRA disregards this and instead accuses them of evading the exempted taxes.
Speaking during a meeting between manufacturers, RDB and the tax body, Sachir Bhatnagar from SRB Investments, a paper bag-making company, said they were given a waiver on import duty of goods they use as raw materials when they were registering the company in 2010, but were later informed by RRA to pay the taxes.
“The incentive was implemented by RDB after studying and certifying our documents for 2011, 2012 and 2013, in the presence of a delegate from RRA. However, last year we were informed that the incentive had not yet been gazetted and we paid the import taxes,” he told the meeting attended by Richard Tusabe, the RRA Commissioner General, at the Kigali Special Economic Zone on Wednesday.
Bhatnagar said though the incentive was finally published in the national gazette in July last year, they were audited by RRA and asked to pay Rwf194 million in import duties for 2011, 2012 and 2013 retrospectively, he said is not fair.
Sandeep Phandis, the head of business at Safintra, a steel maker, urged the government to correct inconsistencies in the system, and clarify on the tax incentives given to different investors. Otherwise, ‘benefitting’ firms risk being penalised for tax evasion, he added.
“Recently, we were trying to get a quotation for a facility we are constructing; RDB indicated a 10 per cent tax, while RRA officials put it at 25 per cent. So, these small issues should be rectified because they cost us a lot in the long-run,” he said.
The manufacturers noted that though there are many incentives for investors like them, the implementation is poor.
Commenting on the issues raised by the industrialists, Tusabe said the tax body was reviewing the list of tax-exempt and zero-rated items.
He added that the disparities highlighted by the producers could have been due to some gaps on RRA’s side in solving the challenges.
Tusabe noted that there should not be any inconsistencies between RRA and RDB quotations.
He urged the RAM members to always share their inputs during policy-making processes like informing which imports should be considered as raw materials before laws are gazetted.
Norbert Muhizi, the exports division manager at RDB, however, dismissed the industrialists reported contradictions between what RDB promises investors and what is actually administered by RRA.
“The problem could be in the interpretation by the beneficiaries. What many of RAM members referred to here are exemptions on import duties for imported factory inputs,” he explained.
He advised manufacturers to always refer to the tax code to find out which raw materials are duty free to ensure that the goods they are importing are eligible for the tax exemption as per the East African Community (EAC) Customs Act.
“Some investors think that whatever is used in manufacturing should be interpreted as a raw material; this is not necessarily true,” he said.
He, however, noted that imported raw materials that are not in the tax code can be added during review of the list by the EAC secretariat and stakeholders.
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Africa’s infrastructure spend to hit $180b by 2025
A report by Pricewaterhouse and Coopers (PwC) on ‘Capital Projects & infrastructure in East Africa, Southern Africa and West Africa: Trends, Challenges and Future Outlook’ has indicated that infrastructure spends in the region is estimated to grow from $70 billion last year to $180 billion per year by 2025.
The report, a copy of which was obtained by The Nation, at the weekend presented the findings of a survey conducted last year of key players in the infrastructure sector, including donor funds, financiers, government organisations and private companies across East, West and Southern Africa, indicated an opportunity-filled future for infrastructure development in sub-Saharan Africa.
The sectors surveyed include water, transport and logistics, energy, mining, telecoms, and real estate, with the main focus being on economic infrastructure.
According to the report, dealing with Africa’s infrastructure backlogs and its future demands is high on the agenda of leaders and civil societies on the continent and abroad.
It also noted that while the continent’s infrastructure lags behind that of the rest of the world with some 30 per cent in a dilapidated condition, yet, there is widespread recognition of the vast business opportunities on the continent as a growing consumer market as well as the vast opportunities for infrastructure investment and development.
Capital Projects & Infrastructure (CP&I) Leader for PwC Africa, Mr. Jonathan Cawood, explained that the shallow economic recovery in most developed markets has led to a shift of focus to faster-growing regions, including infrastructure development sector.
He said expressed the confidence that with an abundance of natural resources and recent mineral, oil and gas discoveries, demographic and political shifts and a more investor-friendly environment, the investor spotlight shines brightly on Africa.
“While the recent shifts in oil price, currency and internal security challenges may impact in the short term, the fundamentals for growth haven’t changed. Hence, we believe the outlook for infrastructure development and economic growth remains positive. A peaceful transition to a new ruling party in the recent elections has injected further optimism and confidence,” Cawood said.
He said infrastructure plays key roles in economic growth, reducing poverty, and having between five and 25 per cent annual return on investment as an economic multiplier.
He said countries that have been most successful in developing and maintaining infrastructure have established programmes of prioritised investment opportunities with a number of features, including clear political support, a proper legal and regulatory structure, a procurement framework that can be understood by both procurers and bidders, and credible project timetables.
Its CP&I West Market Leader, Mr. Ian Aruofor, noted that sustaining West Africa’s impressive economic growth profile requires vast investment in enabling infrastructure. Therefore, improving governance, institutional reforms, trade, technology and an empowered workforce, all lend credibility to West Africa’s growth story.
He said West Africa is one of the most attractive destinations for investors in infrastructure, considering the region’s growing population and its wealth of natural resources which serves as foundation for sustainable economic growth. But notwithstanding these potentials, numerous challenges plague infrastructural development in the region. Notably are challenges in the execution of capital projects; availability of funding; political risk and government interference, including the regulatory and policy environment.
“Resolving these identified challenges quickly and creatively will not only positively affect the outcome of current projects, but more importantly, will attract other project developers, owners and investors to enter the African market. It will also reduce the number of delays and the size of cost overruns, providing an example to other project owners and investors that African infrastructure can truly be developed efficiently and profitably,” Aruofor submitted.
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EAC cross-border payments credited
Having a regional cross-border payment systems in Africa goes a long way towards easing concerns that have arisen about the general reduction in correspondent banking relationships globally, writes Paul Tentena.
This, according to Lesetja Kganyago the Governor South African Reserve bank (SARB) will bring about greater efficiencies in the payments process.
Kganyago said the South African Development Community (SADC) Integrated Regional Electronic Settlement System (SIRESS), launched in July 2013, is already having a significant impact on cross-border payments.
Ablout 43% of intra-SADC payments were now taking place through SIRESS. “By the last week of April this year, SIRESS had reached the R1 trillion settlement mark,” he said.
He praised other regional solutions implemented in the payment systems environment since the year 2000 like the West African Monetary Zone (WAMZ), and the East Africa Payment Systems (EAPS) of the East African Community (EAC).
“The EAPS is a secure, effective and efficient funds transfer system that enhances efficiency and safety of payments and settlements within the region. It also facilitates cross-border transactions that are essential for boosting intra-regional trade among East African countries.
“Some of the benefits of EAPS include real-time funds transfers, finality and irrevocability of payments, increased accessibility and same-day settlement. The initiative is indeed a success that is worth celebrating,” Kganyago said. He was speaking during the 22nd SWIFT African Regional Conference (ARC) held in Cape Town recently.
Society for Worldwide Interbank Financial Telecommunication (SWIFT) brings together, bankers, policymakers, industry leaders and the broader financial community from across the African continent.
“If the decline is the result of establishing efficient settlement systems across borders, then this is a welcome development. However, if it is flowing from the unintended consequences of changes in regulation, then it would be a matter of concern,” Kganyago said. He said regional initiatives such as SIRESS resulted in more efficient transacting mechanisms within regions.
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EAC tables USD 110 million budget to Regional Assembly
Budget prioritizes consolidation of the Common Market and the move towards the Monetary Union
The EAC on Thursday presented Budget estimates for the Financial Year 2015/2016 totalling $110, 660,098 to the East African Legislative Assembly sitting in Arusha. Hon Dr. Abdallah Sadaala Abdallah, Deputy Minister for EAC, United Republic of Tanzania and the Chair of the Council of Ministers presented the Budget Speech to an attentive House.
The 2015/2016 Budget is a drop down from $126,110,145 Million in the previous Financial Year. The Budget prioritizes operationalization of the Single Customs Territory by developing requisite systems and administrative mechanisms, enhanced implementation of the EAC Common Market Protocol with particular focus on implementation of the new generation EAC internationalised e-Passport and development of the EAC trading, payments and settlements systems.
The EAC Political Federation is also a key priority area on the agenda in the coming Financial Year as the mode of the regional Constitution making process commences. Other key areas include development of cross-border infrastructure including roads, implementation of the Vehicle Load Control Law and sensitization of weighbridge operators.
In addition, the Budget focuses on the implementation framework of a liberalised EAC Airspace, and in the preparation of a policy and regulatory framework for International mobile communications roaming services.
Other areas include the EAC Industrialization Policy which is expected to be implemented with focus given on upgrading of Small and Micro-Enterprises (SMEs) competitiveness, strengthening the collection and compilation of industrial statistics and the implementation of EAC Peace and Security initiatives under the Political Federation division.
The Budget is allocated to the Organs and Institutions of the EAC as follows; East African Community Secretariat ($69,636,849), East African Legislative Assembly ($15,865,646) and the East African Court of Justice ($4,301,551).The Inter-University Council for East Africa shall receive ($4,507,648), Lake Victoria Basin Commission ($10,137,163) while $ 3,091,097 is earmarked for the Lake Victoria Fisheries Organization.
On their part, the East African Science and Technology Commission shall receive ($ 726,755), East African Kiswahili Commission ($ 756,361) and the East African Health Research Commission ($ 935,498). A new outfit, East African Competition Authority is to benefit from $701,530 in the Financial Year.
The 2015/2016 Budget is to be financed by Partner State contributions ($47,566,973) compared to USD 46, 958,273 of the current year; Development Partners support ($58,555,635) which is a significant drop from USD 75,121,126 of the previous year. Other sources of revenue shall account for USD 4,537, 490, according to the Minister.
Hon Dr. Abdallah highlighted a number of achievements registered in the Financial Year 2014/2015, notably, the commencement of the clearance of goods under the Single Customs Territory on the Central Corridor as well as rollout of more products on the corresponding Northern Corridor. He remarked that the EAC Elimination of Non-Tariff Barriers Bill (NTB), 2015 passed recently by EALA was a boost and the Bill coupled with a legally binding mechanism for elimination of NTBs, would spur business and enhance the free movement aspects. The Minister told the House that National Monitoring Committees on NTBs and the EAC Regional Forum on NTBs continued to spearhead the elimination of NTBs affecting Intra-EAC trade.
According to Hon Dr. Abdallah, the status of elimination of NTBs as reflected in March 2015, shows that: eighteen NTBs were reported as unresolved, four NTBs were reported as new while another eighty-three NTBs were reported to have been cumulatively resolved.
Hon Dr. Abdallah noted that EAC had adopted the legal and regulatory framework of the EAC Securities Market that include public offers for equity securities and fixed securities and regional listings in the securities market.
On the Common Market, the Chair of Council remarked that the EAC Common Market Scorecard 2014 launched in February 2014 was a key tool in the implementation of the Protocol.
“The Scorecard should be able to assist Partner States to identify areas of slow or limited progress and foster stronger peer learning to accelerate its implementation” the Minister said. He remarked that the financial period had also witnessed the ratification of the East African Monetary Union Protocol which was signed in November 2013. The Minister noted that construction of the One Stop Border Posts (OSBPs) at the common borders was on-going with a completion rate of over 80% in majority of the border posts.
Minister Abdallah remarked that a holistic mapping of regional value chains was being undertaken for agro food and agribusiness, renewable energy and fuels in the industrialization sector. He remarked that there was on-going Research and Development and exchange of experiences in the local pharmaceutical production sub-sector to enhance access to quality and efficacy medicines.
Under Infrastructure development, the Minister noted the on-going works especially on the Northern Corridor. He said the Arusha-Holili/Taveta-Voi road project and the second multinational road projects in the region had commenced. The Arusha-Holili section in the United Republic of Tanzania comprises of a by-pass and the dual passage way of the Sakina-Tengeru road while on the Kenyan side, the 90km long Taveta-Mwatate road awaits an upgrade from gravel to bitumen.
The African Development Bank (AFDB), Hon Dr Abdallah, states, has set aside USD 200 Million for each of the potions (on the Kenya and Tanzania side) of the Malindi-Lungalunga/HoroHoro Tanga – Bagamoyo roads.
At the same time, Minister Abdallah stated that EAC had signed a grant with the AfDB under the NEPAD-IPPF to finance feasibility studies for two links to the Central Corridor. They are the Lusahunga-Rusumo and Kayonza- Kigali road and the Nyakanazi-Kasulu-Manyovu and Rumonge-Bujumbura road. In the railways subsector, the Secretariat received USD 2.3 Million from AfDB for the Railways Sector Enhancement Project as a precursor to the establishment of the EAC Railways Authority deemed by EALA as key to the long-term investment strategy for the railway sector.
In the maritime sector, the Chair of the Council of Ministers stated that a baseline study on Maritime transport and subsectors was completed in December 2014 and added that a proposal for financing development of the Maritime search and rescue exercises framework had been developed.
The Minister also assured the House that the EAC corridor Initiatives were on course. ”Mr. Speaker, in July 2014, the EAC Secretariat signed a Strategic Cooperation Framework Agreement with the East African Corridors Agencies namely; the Central Corridor Transit Transport Facilitation Agency, the Northern Corridor Transit and Transport Coordination Authority; and the LAPSSET Corridor Agency. The Agreement aims at fostering co-operation and collaboration between the parties in activities aimed at promoting integrated, efficient and cost effective transport systems in the EAC region and beyond. Pursuant to this Agreement, several consultative meetings have been held between the parties”, Minister Abdullah said.
The Minister highlighted a number of initiatives in the civil aviation sub-sector aimed at sustainability of the EAC Airspace. In the productive sectors, the Minister revealed that steady progress towards the establishment of the East Africa Centre for Renewable Energy and Energy Efficiency (EACREE) had been made. The EACREE, he reported, aims at providing a platform for sustainable energy in the region.
On industrialization and the Small and Medium Enterprise Development (SMEs) sub-sector, the Minister was categorical that both areas are critical in enhancing development in the region. He further noted that the region had finalised the review of legal and regulatory frameworks for mineral value addition in the region.
The Chair of the Council said that steady progress had been made towards enacting an EAC Bill on Industrialization.
The Bill aims to empower the Community to take actions for the development of industries and to coordinate the pattern and direction of industrial development and regulate investments to achieve industrial development targets. It further aims to govern the operations of strategic regional industries including addressing issues such as competition, counterfeiting, industrial financing, technology transfer, Public Private Partnership (PPP) in industrial investments, taxation, tariff structures.
On environmental matters, the Minister was emphatic that the region would institute a strategy to combat poaching and illegal trade in wildlife and wildlife products. He added that the process of promoting conservation and shared transboundary ecosystems was on course. The Minister added that a draft Bill on Disaster Risk Reduction had been developed to provide a legal framework for the implementation of a DRR strategy to address increasing frequency of both natural hazards and man-made environmental disasters.
On tourism, the Minister noted that EAC continued to promote itself as a single tourism destination in line with the objectives of the Common Market Protocol.
The Minister termed some of the successes in the health sector in 2014/15 as the finalisation of the EAC Health Sector Strategic Plan 2012-2020 and the operationalisation of the East African Health Research Commission.
He outlined the key priorities for the coming year to include harmonisation of policies revolving on health professionals and streamlining of the laws and regulations of the sector in line with the Common Market Protocol.
On immigration and labour, the Minister informed the House the region had remained focused towards ensuring internationalization of the new generation e-East African Passport to take effect by November 2015.
“Mr. Speaker, the immigration subsector has further prioritized the need to enhance the capacity of the Immigration Directorates and Departments to develop integrated e-immigration management systems, create enhanced e-immigration services for the public by adopting advanced Technology and improving processes and to put in place a secure e-immigration network, through the adoption of biometric technology at all borders to reinforce the national security systems”, the Minister said.
“Towards this end, the 2015/2016 Budget will support the implementation of the e-Immigration Regional Strategic Framework, the development of an Action Plan and further build the capacity of immigration officers on ICT to enhance the implementation of the immigration obligations under the EAC Common Market Protocol”, the Chair of the Council of Ministers added.
On the Political Federation, the Minister informed the House that the Council of Ministers had established a Sub-Committee to consider the roadmap for the constitutional making process and to determine the model structure for the Political Federation. He said this would be considered at the next meeting of the Council of Ministers.
He however said that success of the integration process was tantamount to a predictable security environment including combating security.
“Terrorism remains an omnipresent threat to the enjoyment of these freedoms and rights. Whereas security agents will remain vigilant and fulfill their mandate through the platforms availed within the integration realm, focus within the coming year, will be on greater engagement of trans-boundary communities in border security management”, Hon Dr. Abdullah noted.
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UNCTAD released its Annual Issues Note on Latest Developments in ISDS
Investor-State dispute settlement (ISDS) is a highly controversial issue, with a number of countries currently reassessing their positions. To inform and facilitate this debate, UNCTAD provides up-to-date statistical information as well as reviews decisions issued by arbitral tribunals in the course of the past year.
Investment arbitrations against host countries continued to grow in 2014, albeit at a slower pace than in the three previous years. Forty-two new known cases were initiated, while the total number of known treaty-based cases reached 608. Forty per cent of new cases are against developed countries, which is 12 percent higher than the historical average.
The sectors where most cases were filed in 2014 are the generation and supply of electric energy, followed by oil, gas and mining, construction and financial services. The two types of State conduct most commonly challenged by investors last year were cancellations or alleged violations of contracts and revocations or denials of licences.
Investor-State tribunals issued at least 43 decisions in 2014, 34 of which are in the public domain. The overall number of concluded cases has reached 356, with 37 per cent decided in favour of the State, 25 per cent in favour of the investor and 28 per cent of cases settled.
Arbitral decisions rendered in 2014 touch upon a number of important legal issues concerning the scope of treaty coverage, the conditions for bringing ISDS claims, the meaning of substantive treaty protections, the calculation of compensation and others. On a number of issues, tribunals continue to arrive at divergent conclusions.
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Hatch welcomes Senate action on Bipartisan Trade Bills
In Speech Utah Senator Outlines Support for Trade Preferences & Customs Legislation
In a speech on the Senate floor today [14 May 2015], Finance Committee Chairman Orrin Hatch (R-Utah) welcomed floor action on Finance Committee-passed trade legislation – the Trade Preferences Extension Act of 2015, also known as the preferences bill, and the Trade Facilitation and Trade Enforcement Act of 2015, known as the customs bill.
“Both of these bills have been in the works for some time. They were among the four trade bills we reported out of the Senate Finance Committee last month. As a principal co-author of both of bills, I am very glad that we’ve found a way to get them to this point,” Hatch said.
Hatch expressed concern for a currency amendment attached to the customs bill, but reiterated his support for passing the bill through the Senate:
“Despite the reservations I have about the flawed currency manipulation concepts and language and the unfunded mandate on employers, I believe it’s important that we vote to move the customs bill forward,” Hatch continued. “Overall, this is a good bill. A lot of work has gone into it and I know that it reflects the priorities of a number of our members here in the Senate, including myself. That being the case, I plan to vote in favor of passing this legislation later on today and I urge my colleagues to do the same.”
The complete speech, as prepared for delivery, is below:
Mr. President, today the Senate will vote on two pieces of important trade legislation.
Both of these bills have been in the works for some time. They were among the four trade bills we reported out of the Senate Finance Committee last month. As a principal co-author of both of bills, I am very glad that we’ve found a way to get them to this point.
The first bill we’ll be voting on is the Trade Preferences Extension Act of 2015. This bill will reauthorize and improve three of our trade preference programs: the Generalized System of Preferences, or GSP; the African Growth and Opportunity Act, or AGOA; and tariff preferences for Haiti.
I’d like to take a few minutes to talk about each of these programs individually, starting with the GSP.
The GSP is a program designed to promote trade with developing nations by providing for non-reciprocal, duty-free tariff treatment of certain products originating in those countries. The program helps beneficiary countries advance their economic development and encourages them to move toward more open economies and eliminate trade barriers for U.S. exports.
But, the GSP does more than provide assistance in the developing world.
It also assists hundreds of businesses here in the United States. Across our country, manufacturers and importers benefit by receiving inputs and raw materials at a lower cost. Approximately three-quarters of U.S. imports under GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods here at home.
Unfortunately, because the program expired in 2013, these U.S. businesses have had to deal with high tariffs on these imports for the last two years. Last year alone, without the GSP program in place, American companies paid over $600 million in tariffs.
Businesses in every state have been affected by the expiration of GSP and have a vested interest in the renewal of the program. There are businesses in my home state of Utah and around the country that have been left with difficult decisions about downsizing, hiring freezes, and employee layoffs in the absence of GSP.
Today, I expect the Senate will take a big step toward ending this problem.
Also included in the preferences bill is the renewal of the AGOA program, which encourages African countries to further develop their economies by lowering U.S. tariffs on their exports.
Since AGOA was enacted in 2000, trade with beneficiary countries has more than tripled, with U.S. direct investment growing more than six-fold in that time. The program has helped to create more than a million jobs in Sub-Saharan Africa.
I worked with my colleagues on the Finance Committee to craft reauthorization language that will improve on AGOA’s past success, to remove obstacles to trade in Sub-Saharan Africa, and allow both that region and our job creators here at home to benefit from expanded market access.
I share many of my colleagues’ belief that benefits under AGOA should go to countries making good faith progress toward meeting the program’s eligibility criteria.
For example, I am very concerned that officials in Republic of South Africa recently indicated they will attempt to renegotiate commitments made under the General Agreement on Trade in Services to require foreign owned companies to relinquish 51 percent ownership and control to South Africans.
South Africa also developed a draft policy that proposed changes to intellectual property rights laws, which contained significant shortcomings, including inadequate protections for patents, trademarks, and copyrights. I hope very much as they redraft this policy, it will include recognition of how important protection of intellectual property is to supporting economic growth.
But it’s not just South Africa.
For example, I understand other beneficiaries under the program continue to impose barriers and limitations to cross-border data flows or otherwise limit digital trade.
Because of these concerns, we thought it was important to create a mechanism under the AGOA program which would allow for benefits to be scaled back if a country is found to not be making good faith progress on these and other issues.
The legislation also includes new consultation and notification requirements, keeping Congress informed of beneficiaries’ progress. And, there are new mechanisms for stakeholders to petition the administration to raise awareness about potential eligibility violations. The bill will require these petitions to be taken into account when determinations are made regarding a beneficiary’s status and in regular reporting.
I know the AGOA program has a lot support here in Congress among members of both parties. I think we’ve been able to make some improvements that will broaden that support even further.
Finally, the preferences bill would extend preferential access to the U.S. market for Haiti.
Haiti is one of the poorest economies in the Western Hemisphere. The Haiti preference programs support well paying, stable jobs in a country saddled with poverty and unemployment.
I hope this extension will encourage continued economic development and support democracy in Haiti.
This is a strong preferences bill, Mr. President. I expect a strong vote in favor of passing it later today.
Next, the Senate will vote on the Trade Facilitation and Trade Enforcement Act of 2015, which includes important provisions to reauthorize and modernize the operations of Customs and Border Protection, or CBP, and significantly improve intellectual property rights protection in the U.S. and around the world.
The customs bill will facilitate the efficient movement of merchandise destined for the United States by formalizing in statute programs such as the Centers of Excellence and Expertise. It will also ensure that U.S. customs and trade laws are uniformly implemented nationwide and help ensure that the private sector and CBP work together.
With this bill, we will also ensure that the Automated Commercial Environment and the International Data System are completed so that trade documentation can finally be submitted electronically and importers will no longer be required to submit the same information to numerous government agencies.
In addition, the bill will modernize the drawback process by moving from a labor intensive paper-based system to an electronic claims process that will significantly free up resources in the private and public sector. And, it will increase the de minimis level from $200 to $800, reducing needless burdens on small businesses importing into the United States.
Additionally, the bill strengthens our trade remedy laws and our ability to respond to imports that pose a threat to the health or safety of U.S. consumers.
When crafting this customs legislation, I was particularly interested in beefing up our enforcement of intellectual property rights. The bill includes the strongest possible provisions with regard to intellectual property rights enforcement.
For example, our bill will establish in law the National Intellectual Property Rights Coordination Center to coordinate federal efforts to prevent intellectual property violations. It will also significantly expand CBP’s tools and authorities to protect intellectual property rights at the border by requiring CBP to share information about suspected infringing merchandise with right holders.
Our bill will also provide CBP with explicit authority to seize and forfeit devices that violate the Digital Millennium Copyright Act, and require CBP to share information with right holders who are injured by these unlawful devices.
The bill also contains provisions to establish a process for CBP to enforce copyrights while registration with the Copyright Office is pending and to significantly improve CBP’s reporting requirements to hold the agency more accountable for its enforcement efforts with regard to intellectual property.
The bill will strengthen CBP’s targeting of goods that violate intellectual property rights, improve CBP’s cooperation with the private sector and with foreign customs authorities on enforcement, and require an education campaign at the border.
I’m particularly fond of that last part.
At my insistence, the bill includes provisions that will require all versions of the customs declaration form that everyone fills out when they enter the U.S. to contain a warning that the importation of goods that infringe on intellectual property rights may violate criminal and/or civil law and may pose serious risks to health and safety.
In addition to enhancing protection at our borders, our customs bill will provide USTR with additional tools to improve protection of intellectual property rights by our trading partners overseas in order to stop infringing goods at the source.
For example, the bill will establishes a Chief Innovation and Intellectual Property Negotiator, with the rank of Ambassador, to ensure intellectual property rights protection is at the forefront of our trade negotiation and enforcement efforts and to enhance USTR’s accountability to Congress on these issues.
On top of that, the bill will give USTR more tools to increase enforcement for trade secrets, and to ensure that countries that consistently fail to protect intellectual property meet specified benchmarks for improvement.
I’m a big fan of this bill, Mr. President. It includes a number of my top trade enforcement priorities and I’m very glad we’ll get a chance to vote on it today.
Of course, it’s not perfect. Some of the amendments that were added in committee leave me with some reservations.
Most notably, the bill now contains provisions that purport to deal with currency manipulation that are, in my view, very problematic.
One provision sets up an avenue for a countervailing duty investigation or review to determine whether some measure of a currency manipulation is effectively a subsidy, either “directly or indirectly” to a country’s exports. If the government finds that the manipulation, once again either “directly or indirectly,” an export subsidy, sanctions can follow.
This provision is problematic for a number of reasons.
First of all, it is likely not compliant with our existing international trade commitments.
It would effectively require the imposition of trade sanctions that, under the language of the legislation, could be based on presumptions without support. And, it will almost certainly invite retaliatory trade sanctions from our trading partners who will argue, and in fact have already argued, that actions taken by the Fed constitute currency manipulation.
While authors of the currency manipulation provision in the customs bill may believe that there is a clear delineation between monetary policies used primarily for domestic economic stabilization and policies used to gain trade advantage, there is not.
When Japan engages in quantitative easing to boost its economy and inflation expectations, sometimes at the very urging of U.S. officials, is that manipulation?
When the Federal Reserve engages in quantitative easing, with part of the expected benefit being downward exchange rate pressure and boosted exports, is that manipulation, or just domestic stabilization?
Is Germany’s persistent trade surplus somehow partially caused by ongoing quantitative easing activities at the European Central Bank?
And, with respect to detection, despite the intent of the authors of the manipulation provision in the customs bill, accuracy is evidently not a concern.
I am sure that everyone has looked at the recent exchange rate assessments for 2013 from the International Monetary Fund External Sector Report.
For Japan, one IMF method suggested 15 percent yen overvaluation, while another method suggested 15 percent undervaluation. Yet, under the currency manipulation provision in the customs bill, IMF models and methods are what we’re supposed to use to set trade sanctions.
For South Korea, the two IMF methodologies suggested undervaluation between around seven percent and 20 percent. So, when we set a punitive countervailing duty, what do our authorities do? Assume that South Korea benefited from currency undervaluation of seven percent, or 20 percent, or some random number between the two?
Who knows?
This provision, unfortunately, simply won’t work, since it assumes accurate knowledge and abilities to determine some fundamental equilibrium exchange rates that the IMF and the economics profession simply do not have.
Under the questionable provision of the bill which allows for investigation of currency undervaluation, and potential ensuing trade actions, I believe that the authors of the provision were overly heroic, and mistaken in their belief about the precision of currency valuation technology. The provision would appeal to models and methodologies, as described in IMF documents.
The problem is that even the IMF does not use those models and methodologies to make definitive judgements about appropriate currency values, which are inherently some of the most difficult things for economic models to identify.
It would not be difficult for our trading partners to use precisely the same models and methodologies to make countervailing cases against Federal Reserve monetary policy, resulting in retaliatory trade sanctions, and perhaps defensive currency interventions.
This is a clear road to trade wars and currency wars replete with competitive devaluations. Such a road is paved by the offending provision in the customs bill, which basically gives our trading partners a template for their own accusations about currency manipulation and ensuing trade sanctions.
This is problematic, Mr. President. And while Senators in this chamber would like to simply decree that that our monetary policies are just domestic economic stabilization, while foreign monetary policies that may look similar are manipulation, self-evaluations will not be acceptable in international trade and agreements.
I understand the desire among many of my colleagues to address currency manipulation. And, I want to work with them on this issue. But, I am convinced that the currency manipulation provision in the customs bill simply won’t work, and, when tried, it will simply give ammunition to our trading partners to consider engagement in trade wars, currency wars, competitive devaluations, and beggar-thy-neighbor monetary policies.
This isn’t what we should be shooting for with our nation’s trade policy.
In addition to the currency language, I am also concerned about a provision in the bill – which was added during the markup – that would require employers to report occupational classification data to state agencies when filing their quarterly wage reports.
This is an entirely new burden that would be placed employers throughout the country, added to all the other reporting burdens they already face, and would require brand new systems for reporting and collecting information.
And, in the end, it’s not readily apparent just how valuable this newly collected information will be.
According to CBO, this new requirement would cost employers throughout the country more than $200 million between 2016 and 2020. That may not seem like much compared to the numbers that get thrown around here in the Senate. But, when we’re talking about small businesses who struggle from month to month to cover their payrolls, it’s a burden that, at least to me, doesn’t appear to be necessary.
So, once again, I’m concerned about this provision and the impact it might have.
Despite the reservations I have about the flawed currency manipulation concepts and language and the unfunded mandate on employers, I believe it’s important that we vote to move the customs bill forward.
Overall, this is a good bill. A lot of work has gone into it and I know that it reflects the priorities of a number of our members here in the Senate, including myself. That being the case, I plan to vote in favor of passing this legislation later on today and I urge my colleagues to do the same.
Once again, Mr. President, I’m very glad to see that we’re making progress on moving these bills through the Senate. I want to thank all of my colleagues – particularly those on the Finance Committee – who worked so hard on these bills to get them to this point.
These are important votes we’re going to take today, Mr. President. I expect that both of these bills will receive broad, bipartisan support.
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2nd African Union Customs Experts Meeting on Coordinated Border Management in Africa
The Commission of the African Union envisages holding a 2nd African Union Customs Experts Meeting on Coordinated Border Management in Africa from 20-22 May 2015 in Harare, Zimbabwe.
The meeting is organized pursuant to the activities in the Trade Facilitation Cluster of the Action Plan for Boosting Intra Africa Trade that was endorsed by the African Union Assembly of Heads of State and Government through their decision (Assembly/ AU/Dec.394 [XVIII]) during their 18th Ordinary Session held in Addis Ababa, Ethiopia, in January 2012. Among other things, the Decision is aimed on promoting Africa’s Regional Integration agenda as well as making trade serve more effectively as an instrument for the attainment of Africa’s rapid and sustainable socio-economic development.
Two decades after the Abuja treaty was signed, both intra-African and external trade have remained stubbornly low, and while regional trade in North America and Western Europe reach 40% and 60% respectively, intra African trade is approximately 10%. If Africa trades with itself more, it can take advantage of short travel distance and an already available market from its huge population of 1, 032 billion people. Apart from its poor and dilapidated physical infrastructure which has been a deterrent to regional trade, poor trade facilitation measures and instruments, coupled with uncoordinated border management practices have immensely contributed to Africa’s minute show up in trade levels.
Trade Facilitation has become a topical subject in the recent past. At the level of the WTO, discussions on Trade Facilitation were incorporated in the Doha Round in 1996, and were commonly known as the Singapore Issues, and more specifically, the “July Package”. To address and show commitment to the problems encountered in the trade facilitation process, the Ministers of Trade made the Singapore Ministerial Declaration (1996) under Article 21: “We further agree to direct the Council for Trade in Goods to undertake exploratory and analytical work, drawing on the work of other relevant international organizations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area”. Negotiations on the WTO ATF were concluded at the 9th Ministerial Conference held in Bali in December 2013, and will come into effect after ratification by two thirds of its Members. To date, only 8 African countries have ratified the Agreement. Articles 8 and 12 of the Agreement specifically relate to the need for Coordinated Border Management and cooperation.
Integrated and Coordinated Border Management
Coordinated Border Management is based on the need for agencies and the international community to work together to achieve common goals. The model suggests that border management agencies can increase control while providing a more efficient service, and that they can do so while retaining their own organizational mandates and integrity. Typically, coordinated border management is not achieved through forced organizational change, which invariably has the potential to create conflict, but by creating an overarching governance body charged with establishing a border management vision and ensuring that all stakeholders work together to achieve it. This therefore requires strong political will and commitment and appropriate incentives and disincentives.
In most countries, a number of agencies have some form of regulatory responsibility at the border. Each of these agencies has its own specific mandate from government, and taken together they cover such issues as diverse as health, product safety, quarantine, immigration controls, vehicle inspections, insurance, road access tolls, and security as well as revenue and other customs concerns. Notwithstanding that there may be several agencies with border management responsibilities, the fundamental nature of the challenge that each confronts is the same. The challenge is to facilitate the legitimate movement of people and goods across increasingly blurred, or even virtual, borders while at the same time, meeting the government’s mandate to maintain the integrity of the border, to protect the community, and to prevent the unlawful and/or unauthorized movement of both people and goods.
Consequently, unless regulatory authorities with border responsibilities coordinate their activities, there is the real danger that border delays will be realized on a more regular basis along with unnecessary compliance costs and the associated administrative cost of operation. There is also potential for the unlawful entry of goods or people if border agencies fail to share intelligence, thereby providing a complete risk profile of a particular consignment or individual.
While border agencies have a mandate to provide an appropriate level of facilitation to trade and travel, there is need to maintain regulatory control in a way that reduces the impact of interventionist strategies as much as possible. This therefore implies keeping the amount of intervention or interference to the minimum necessary to achieve the policy outcome and also ensuring that regulatory requirements (red tape) are not unduly onerous or overly prescriptive. In seeking to achieve this balance, border agencies must simultaneously manage two risks – the potential for noncompliance with relevant laws and the potential failure to provide the level of facilitation expected by their government.
The motivation for a holistic approach to coordinate activities at border crossings stems from the need to reduce the costs of doing business, thereby facilitating trade. Trade costs,(consisting of transportation costs, time costs, and policy barriers-coupled with tariffs and non-tariff costs, information costs, contract enforcement costs, exchange rate costs, legal and regulatory costs) are large, and a significant portion of them results from nations’ economic policies. Research has indicated that there are more benefits to be realized from the efforts in increasing Trade Facilitation than those realized from tariff reductions. It is estimated that output gains from average tariff decreases under the Uruguay Round negotiations amounted to 2% of total trade value, whereas gains deriving from trade facilitation could rise as high as 3%.
One of the areas which arguably is gaining momentum in trade facilitation is implementation of Single Window systems. The single window aims to provide all trade related parties in a country; government agencies, commercial actors, and individuals either directly or indirectly concerned in an import or export process, usually in an increasingly paperless environment that reduces processing costs, improves revenue collection, and boosts compliance. At the same time, the single window system aims to facilitate trade by keeping delays in goods receipt and delivery as low as possible.
A single window concept, already adopted in varying degrees in Africa can make information more available, improve its handling and simplifying and expedite information flows between trade and government. It can also lead to more harmonizing and sharing of data across government systems, bringing great gains to all parties involved in cross border trade. If properly implemented, the single window concept can make controls more efficient and effective.
The principle of integrated and coordinated border management in most countries already exists. This is manifested by the existence of border committees, usually put in place for the management of border posts or at times, for a specific function or project. The most ideal situation however is to have the same committees at a higher level, say Ministerial and to also make them a permanent feature of integrated border management.
Purpose, Objectives and Scope of the Meeting
The Meeting is expected to contribute to the development of an AU Border Management Strategy, provide a platform for exchange of views and experiences on issues of Trade Facilitation in line with the WTO Trade Facilitation Agreement, and movement of people across borders. It is also anticipated that participants will explore areas requiring capacity building for effective implementation of Coordinated Border Management Programs. This Meeting will also assist African Union Members States that are also members of the World Trade Organization as they prepare to implement the WTO Trade Facilitation Agreement, which largely contains provisions on Coordinated Border Management.
The outcomes of the Meeting will be presented to the 7th Ordinary Meeting of the African Union Sub Committee of Directors General of Customs scheduled to be held in September 2015.
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US$120 bn trade finance gap holding back African growth
Lack of access to affordable trade finance is holding back the economic and employment potential of African countries, says Standard Bank.
According to the African Development Bank’s recent report on trade finance in Africa, the conservative estimate for the value of unmet demand for bank-intermediated trade finance is between US$110 billion and US$120 billion, which is significantly higher than earlier estimated figures of US$25 billion.
“Imagine the number of jobs that would be created if small and medium enterprises (SMEs) in Africa, could do the cross-border transactions that would have been supported by the unmet gap in demand for trade finance. The gap means there are corporates out there who would have liked to have done that business but just because they could not access trade finance they could not do those trades,” says Vinod Madhavan, Head of Transactional Products and Services at Standard Bank South Africa.
Trade finance has a direct impact on employment and Madhavan, who was recently appointed as member of the Banking Commission Advisory Board to the International Chamber of Commerce (ICC), the largest business organisation in the world, says the African market is clearly underserviced from a trade finance perspective.
“There is an opportunity for trade financiers to help fill this void but there are a number of barriers to trade that need to be removed. This is why creating uniform rules and standards across various facets of trade will go a long way to closing these gaps and removing these barriers,” he says.
The ICC Banking Commission produces universally accepted rules and guidelines for international banking practice. ICC rules and guidelines on documentary credits serve as the basis of US$ 2 trillion worth of trade transactions a year. The ICC Banking Commission helps policymakers and standard setters to translate their vision into concrete programmes and regulations to enhance business practices throughout the world.
Letters of credit are very popular in cross-border trade as they are legal and enforceable in all markets that have adopted the ICC standards.
Madhavan says South-South trade in the developing world would be significantly increased if trade finance could meet demand.
According to the World Trade Organisation (WTO), not all developing countries participate equally in international trade, with Africa having the smallest slice of world exports. WTO’s World Trade Report 2014 says the potential of trade in supporting development has not yet been fully realised. The emerging trends suggest, however, that trade will be a major force for development in the future.
Despite the positive outlook, the WTO report says 2014 was the third straight year of below average trade growth and that this will not change in 2015.
“There is a need for education; and by that I don’t mean just training corporates and businesses about trade rules and risk, but also the market participants and regulators. Regulators also need to understand that when they make a change it has both a direct and an indirect (sometimes unintended) impact on what happens,” says Madhavan.
A better understanding of risk finance is needed. “There needs to be a better understanding of how the trade between these markets will grow by taking on more risk in an appropriate manner. This is also where you need the local market participants to give their input and advice,” says Madhavan.
There needs to be more understanding of risk, not just counter-party credit, country, currency risk, but also compliance risk, which is on the rise in Africa (and other emerging markets) and there is a growing concern of de-risking by certain players, who would rather step back than face the higher risks.
While global initiatives in the space of managing compliance risk will benefit businesses in Africa, more hard data on the problem is needed so proper advocacy actions can be taken. This is where collaboration at a forum like the ICC can help get a better handle on the problem and come up with solutions that are relevant and appropriate for emerging markets (such as markets in Africa).
This needs to be augmented by increased awareness and support from corporates.
“There is also a need for corporates to realise they need to be more responsible,” says Madhavan.
Madhavan’s Banking Commission appointment is in line with the Banking Commission’s goal to penetrate new markets, particularly in Africa and is timely ahead of the 2016 ICC Banking Commission’s Annual Meeting, to take place in South Africa.
“Everyone has realised the potential for growth in Africa and now everyone wants a piece of the action. But this does not come without risks.
This is where the framework for trade being developed by the ICC and with participation of stakeholders like Standard Bank can go a long way to improving understanding of Trade and Trade Finance and thereby ultimately enhancing employment opportunities, across the continent,” Madhavan says.
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Enhance trade relations, civil society tells EU
The civil society has urged the European Union Delegation to enhance trade ties with Rwanda.
This was during a debate and interaction programme at Goethe Institute in Kiyovu on Wednesday.
The debate was organised by the Delegation of the European Union to Rwanda to evaluate the role EU plays in improving lives of Rwandans.
Panelists for the debate were Prof Manasseh Nshuti, a former Cabinet minister, an economist and financial expert; Annie Kairaba, the director-general of Rwanda Initiative for Sustainable Development; and James Gahinga, a journalist with Flash FM.
Amb Michael Ryan, the head of EU Delegation to Rwanda, moderated the debate.
Prof Nshuti urged the EU to enhance trade relations thus promote financial independence.
“We need to develop the capacity to substitute aid for something and, for our case, we need to be trading. We need to be trading to give capacity to our people not to be depending on aid.
We need to be equal partners and through trade we can achieve it,” Nshuti said.
“If only my mother’s bananas are allowed into the European Union markets without any barriers like tariffs or non-tariff barriers, she would be earning and would not need any dollar from aid.”
Amb. Ryan said the debate is ideal for the EU to evaluate and share its work in the country.
“We have been a partner to Rwanda for roughly 30 years. In our partnership what we aim at achieving is poverty alleviation but, above all, security and stability. We have great interest in having prosperity spread to our neighbourhoods through programmes that are meaningful to make the populations more secure and confident in their economic and political preferences,” Ryan said.
He added that EU’s main economic development programme funding currently focuses on energy, agriculture and food security, governance and economic accountability, as well as political accountability.
“In the case of Rwanda, we have almost the delightful pleasure of working in a system that is perfectly designed to create partnerships with an organisation like ours which seeks to channel funds and ideas in particular projects.”
Kairaba stressed the need for EU to ease their processes and systems.
“We need to dialogue more. When we are invited by EU to discuss about the roadmap, we don’t take it lightly because it demonstrates genuine partnership. We are not told that ‘this is what we want’ during the roadmap meetings. We are discussing and engaging and this benefits people at the grassroots,” Kairaba said.
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Kenya plans to privatise sugar companies within 12 months
Kenya has approved the sale of the government’s stakes in five sugar companies and expects to sell 75 percent stakes in transactions that will be completed in the next nine to 12 months, the Privatization Commission said on Friday.
The five companies are in urgent need of modernisation to survive competition from the entry of other sugar producers and an impending end to sugar import limits from the Common Market for Eastern and Southern Africa (COMESA) trade bloc after the end of a one-year extension given early this year.
The government will sell shares in millers Nzoia, South Nyanza, Chemelil, Muhoroni and Miwani, the commission said in a statement published in the Daily Nation newspaper.
Two of the businesses, Muhoroni and Miwani, are in receivership.
The Privatization Commission said it plans to sell 51 percent of each of the millers to strategic investors with a track record of managing sugar companies.
“The proceeds will fund the rehabilitation and modernisation needs of the sugar companies,” it said.
A further 24 percent of the companies will be sold to employees and outgrowers -- farmers who grow sugarcane on contract for the mills.
The East African nation is also struggling to improve output because of relatively high production costs and produces a total of 600,000 tonnes of sugar a year, compared with annual consumption of 800,000 tonnes.
The deficit is covered through the strict import quotas from COMESA.
The leading sugar producer, Mumias Sugar, reported a 2014 pretax loss of 3.4 billion shillings ($38 million), compared with a 2.2 billion shilling loss the previous year, blaming weaker sugar prices.
The government has reached a 5 billion shilling ($54.9 million) deal with banks to help cash-strapped Mumias as it implements a reorganisation involving heavy job cuts and a halving of its board of directors.
The Privatization Commission said that the government ultimately aims to sell its remaining 25 percent stake in the sugar companies by other means, including initial public offerings, while reserving a 6 percent stake for farmers.
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Roundtable on African Continental Free Trade Area calls for fresh solutions
A roundtable comprising trade experts in the public and private sectors met in Nairobi, Kenya, recently to discuss the Continental Free Trade Area (CFTA) as a catalyst to Africa’s economic development.
The May 7 event was organized by the African Union Commission, the World Economic Forum and CNBC Africa. The discussions highlighted four critical issues: a 21st century trade and investment agenda for Africa; lowering tariff and non-tariff barriers; resolving the political and technical challenges in establishing the CTFA; and effective private sector engagement in the CFTA negotiations.
The African Union (AU) envisages a CFTA to be launched in 2017. Its aim is to create a single market for Africa, whose one billion people, goods, services and skills, will move freely, creating a larger, vibrant economic space for trade and investment.
The AfDB was represented by Shem Simuyemba, Chief Infrastructure Economist and Regional Integration Expert. He observed that the Bank was driving efforts to help address one of Africa’s most critical challenges, which is inadequate infrastructure to support Africa’s trade, economic integration and transformation.
In 2014, the Bank invested US $6.7 billion out of which 60% was in infrastructure. The bulk of these funds was in power generation and interconnectors in order to enhance power trade across Africa. “The Bank’s interventions were intended to create the necessary economic infrastructure to reduce the cost of doing business, and enhance the competitiveness of Africa’s intra-regional as well as international trade,” Simuyemba said.
Patrick McGee of the World Economic Forum informed participants that “this is the start of series of public-private sector consultations on key issues on Africa’s development such as the pan-African CFTA leading to the WEF Africa Forum to be held in Cape Town, South Africa, on June 3-5, 2015.”
Panelists were unanimous that the CFTA should not just be about trade in goods, but also address issues of trade in services, movement of skills across Africa and more importantly, industrialization, which should be a key pillar of Africa’s trade strategy.
A number of key measures to support the CTFA were cited. These included new generation institutions such as an African competition commission; a continental arbitration mechanism; protection of intellectual property rights, and entrepreneur development and incentives with a special focus on young entrepreneurs. Also, local content development to support African businesses to be anchored onto and benefit from major investments taking place across the continent particularly in infrastructure was mentioned as another possible solution. The need to enhance science, technology and innovation, deepening of financial markets to make is possible for Africans to invest across Africa, as well as harnessing the knowledge economy to improve technology and innovation also emerged as critical solutions.
Apart from AfDB, other participants of the roundtable discussion were Babajide Sodipo, Regional Trade Advisor at the African Union Commission: Rajesh Shah of Pricewaterhouse Coopers (PwC), who is also a member of the Kenya Private Sector Alliance (KEPSA); and Richard Kiplagat, Chief Operating Officer of the consulting firm, africapractice.