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16 ECOWAS countries begin uniform tariff regime for imports
Sixteen countries within the Economic Community of West African States (ECOWAS) may have started the implementation of uniform tariff on imports, beginning from 11 April 2015.
The tariff, set at 35 percent at most, will modify the rights and obligations of ECOWAS member countries under the Common External Tariff (CET). In Nigeria, government has directed immediate enforcement of the new tariff regime which put duty payable on imported items at 0 per cent for social and necessary items, 5 percent for raw materials, 10 per cent for intermediate goods, and 20 per cent for finished goods that are not produced locally.
Nigeria was granted the possibility of adding a fifth band of 35 per cent for finished goods manufactured locally under the new dispensation that is expected to be reviewed in 2019.
The directive to implement the regional tariff regime in Nigeria was conveyed to the Customs high command yesterday by the coordinating minister of the Economy and Minister of Finance, Dr Okonjo Iweala.
The Customs spokesman, Wale Adeniyi, said on Saturday that it was now mandatory for all stakeholders to fall in line with the new tariff regime, saying it would enhance trade facilitation within and outside the region.
The implementation of the ECOWAS CET (2015-2019) together with its Supplementary Protection Measures (SPM) and 2015 Fiscal Policy Measures are being implemented concurrently and took effect from Saturday, after the expiration of the 30 days notice required under the provisions of the ECOWAS Common External Tariff (CET).
By this development, all imports arriving into the country shall be subjected to the rates contained in the CET 2015-2019 and 2015 Fiscal Measures without recourse to the rates applicable before the coming into effect of the ECOWAS CET 2015-2019.
The approved Supplementary Protection Measures (SPM)/Fiscal Policy Measures an Import Adjustment Tax (IAT) list, which involves additional taxes on 177 Tariff Lines of the ECOWAS CET, a National List consisting of items whose Import duty rates have been reviewed to encourage more development in strategic sectors of the economy, an Import Prohibition List (Trade) and applicable only to certain goods originating from non-ECOWAS Countries.
This may create a contradiction between the World Trade Organisation (WTO) commitments of individual countries and the requirements of the regional trade integration project essential for West Africa’s economic development.
Following the adoption of the CET, Nigeria’s simple average tariff on agricultural imports dropped from about 32 per cent in 2000 to 15 per cent in 2010, while its tariff on manufactured products fell from 25 per cent in 2000 to 11 per cent in 2010. Nigeria accounts for more than half of the sub-region’s imports.
In nominal terms, its total imports increased from USD 6 billion in 1990 to USD 64 billion in 2011, while ECOWAS’s total imports rose from USD 14 billion in 1990 to USD 111 billion in 2011 according to United Nations Conference of Trade and Development (UNCTAD).
In terms of import composition, Nigeria accounted for 40 per cent of ECOWAS’s agricultural imports in 2009 and 79 per cent in 2011, while its industrial imports represented 79 per cent and 65 per cent of those of ECOWAS in 2009 and 2011, respectively.
These data confirms the huge trade impact of Nigeria on the sub-region and explains its late and reluctant acceptance of the ECOWAS CET.
The CET is said to be incompatible with the individual commitments with WTO. WTO data clearly shows that the application of the ECOWAS common external tariff – both for agriculture and industry – would be a problem with regard to respecting the individual commitments undertaken by the group’s members at the multilateral level.
All West African countries have lower applied agricultural tariffs than those they have bound at the WTO. Nigeria, for instance, has bound its tariff for agricultural products at 150 percent, while its applied tariff is only 33.6 percent. The common external tariff is a mild form of economic union but may lead to further types of economic integration.
In addition to having the same customs duties, the countries may have other common trade policies, such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country, within the area, they are entering.
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China’s influence over AIIB a concern ahead of founders’ meeting
China could have outsized influence over a new Beijing-backed international development bank under a proposed shareholding structure likely to be discussed at a meeting of member nations in Washington this week, sources say.
The group will meet on the sidelines of the annual meetings of the International Monetary Fund and World Bank in the U.S. capital, said an Indian government official familiar with the plan. India was one of the first nations to join the new bank.
China has proposed that Asian nations own three-quarters of the Asian Infrastructure Investment Bank (AIIB), a larger overall stake than would be warranted were ownership decided by economic weightings alone, given European heavyweights Germany, France, Britain and Italy are also members.
Each Asian member will then be allotted a share of that 75 percent quota based on their economic size, two Japanese sources said – a formula that would guarantee China the largest single voice inside the bank.
China has outlined details of the bank to Japan in an effort to get Tokyo to sign up, the sources said. However, Tokyo remains non-committal due to its close relationship with the United States, which has urged nations to be wary of the AIIB.
“Looking at GDP-based contributions, if the No. 1 and No. 3 (the United States and Japan) aren’t in, then China will have an overwhelmingly large quota and voice,” said one Japanese official. “No country would be able to challenge China. If Japan were in, it would have considerable influence.”
China’s finance ministry did not immediately respond to a request for comment.
The United States had earlier cautioned nations about joining the bank, citing what it called a lack of transparency and doubts about lending and environmental safeguards, and how much influence Beijing would wield.
But its major allies – Britain, France, Germany, Australia and South Korea – signed up anyway.
NOT A POLITICAL ALLIANCE
Jin Liqun, secretary-general of China’s interim secretariat which is establishing the AIIB, said at a forum in Singapore on Saturday that although China would have the biggest share in the bank, it would not dominate its operations.
“AIIB is a bank, not a political organisation or political alliance,” Jin was quoted as saying by China’s official Xinhua news agency. He said the AIIB would be “clean, lean and green”.
China has said it will announce the AIIB’s list of founder members on Wednesday, but it is not clear if the shareholding structure will also be finalised this week.
The Indian official said Asia’s total ownership would be between 70 and 75 percent depending on whether Japan joined or not.
A detailed method of determining the breakdown of national shareholdings had yet to be decided, though it could be based on a country’s nominal gross domestic product or its GDP calculated on a purchasing-power-parity basis, or a mixture of the two. Purchasing power parity would give more weight to developing nations than to rich economies such as Japan.
The AIIB has drawn applications from more than 50 nations from Asia, Europe and the Middle East despite U.S. misgivings.
Beijing says it will not hold veto power inside the AIIB, unlike the World Bank where Washington has a limited veto.
Beijing has also said a board of governors will control the operations of the new bank. Founder members will initially pay up to one-fifth of the AIIB’S $50 billion authorised capital, which will eventually be raised to $100 billion.
Brazil, Russia, India, China and South Africa will also hold a meeting in Washington this week to iron out details of another international development bank, the $100 billion BRICS bank launched last year, officials in Brasilia and Moscow said.
“The idea is that everything will be ready for 2016,” said an official in Brasilia, adding that governance issues will be taken up in Washington.
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U.S. Commerce Secretary hosts inaugural Africa Advisory Council Meeting
Council established by President Obama meets to help fulfill his commitment to the continent
U.S. Secretary of Commerce Penny Pritzker on 8 April 2015 hosted the first meeting of the President’s Advisory Council on Doing Business in Africa (PAC-DBIA) to discuss initial recommendations on ways to strengthen commercial engagement between the United States and Africa. The council, established by President Obama last year during the first-ever U.S.-Africa Leaders Summit, advises the President through the Secretary of Commerce, on advancing his DBIA campaign as described in the U.S. Strategy Toward Sub-Saharan Africa of June 14, 2012.
During today’s meeting, the PAC-DBIA provided guidance and drafted suggestions in an effort to promote broad-based economic growth in the United States and in Africa that will encourage U.S. companies to trade with and invest in Africa.
“Our gathering today is part of the Administration’s effort to write the next paragraphs in what President Obama called a ‘new chapter in U.S.-Africa relations,’” said U.S. Secretary of Commerce Penny Pritzker. “We are building upon what was started at the historic U.S.-Africa Business Forum last August when U.S. firms announced more than $14 billion worth of investments in African markets. I look forward to working with this Council to make doing business in Africa easier for U.S. companies, and to keep America and Africa open for business together.”
The PAC-DBIA is comprised of 15 members representing small, medium, and large companies from a variety of industry sectors. The council’s initial recommendations focus on: investment and access to capital; trade and supply chain development; infrastructure; and marketing and outreach. The council touts efforts to enhance the ability of U.S. companies to compete for major projects with a dedicated U.S.-Africa Infrastructure Center; support capacity building activities for African financial regulators and exchanges through training programs, partnerships, and knowledge sharing; and to improve the perception of doing business in Africa and highlight trade opportunities through an online Doing Business in Africa toolkit and targeted outreach events.
In addition to establishing the PAC-DBIA, other commitments made during the U.S.-Africa Leaders Summit are progressing. To date, of the $7 billion in commitments that the U.S. government made in August, approximately $3.3 billion (47 percent) has been authorized. Also, $1.75 billion of the $7 billion is on track to be approved by the end of the fiscal year.
The United States Trade and Development Agency and the Department of Commerce have completed four trade missions and reverse trade missions. Seven additional missions are planned, including a trade and investment mission jointly led by the Millennium Challenge Corporation and the Department of Commerce to Tanzania in June, and the Department of Commerce’s Trade Winds Mission and Conference starting in South Africa in September.
From 2011 to 2014, the United States closed its trade gap with sub-Saharan Africa by 97 percent. U.S. merchandise exports to sub-Saharan Africa increased 19 percent during this period, reaching $25.4 billion last year. The annual growth rate of U.S. goods exports to sub-Saharan Africa averaged nearly 6 percent, almost doubling the average annual rate of growth to the world during this same period.
For more information on PAC-DBIA, please visit www.trade.gov/pac-dbia.
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SACU threats must signal warning bells
As the Southern African Customs Union (SACU) revenue sharing formula debate rages on, it would be best for Swaziland to start exploring other trade options within the region to increase its revenue base, experts have advised.
In the past few weeks, South Africa has been voicing out its discontent on the revenue sharing formula, arguing that it loses about E30 billion that it would otherwise be entitled to if the distribution of revenue were equitable. In a commentary about tax proposals for the 2015 South African budget, accounting firm PwC slammed the revenue sharing formula agreed to by SACU, arguing that a more equitable sharing of the customs revenue pool would see South Africa entitled to at least 80% of the pool.
Economist Christopher Fakudze said Swaziland needed to improve its terms of trade via the Common Market for Eastern and Southern Africa (COMESA) provision as an alternate trade arrangement.
“We need a shift in the mindset from direct dependence on the external revenue pool (in the SACU context) to other collection strategies derived from expanded quantities of produce that take care of virtually all WTO (World Trade Organisation) commodity nomenclatures,” he said.
Fakudze said the idea was to go full-swing in trade participation, of course, “bearing in mind that we are yet to learn lessons from the Swaziland experience”.
The 105-year-old customs union agreement between the member states; South Africa and Botswana, Lesotho, Namibia and Swaziland (BLNS) distributes revenue collected on import duties and excise based on a number of criteria. The import duty revenue is collected on all imports coming into the customs union from outside. Excise duties are distributed by the members based on the share of the gross domestic product (GDP) of the countries involved. The excise revenue goes mostly to South Africa, which is by far the largest economy, but import duties are distributed based on a formula that calculates each country’s portion based on its share of intra-SACU imports.
This results in the bulk of the revenues going to the BLNS countries because they export almost nothing to South Africa and import almost everything from South Africa.
South Africa argues that in 2014, it exported E132 billion to the four countries, but imported only E28 billion. The ‘big brother’ further says the E104 billion surplus, therefore, formed the basis for what is, in effect, a massive export subsidy to the BLNS countries. “All the member states have a key interest in a future SACU that does not regress on regional Integration,” said another local economist, who preferred anonymity. “Economically, the BLNS countries cannot survive without South Africa’s support and politically, South Africa cannot afford to have any more failed states on its doorstep.”
Outcome
He said the outcome of SACU’s current dilemma would also affect the broader regional integration agenda, adding that if regional integration is seen to result in tangible benefits for participants, a strengthened SACU could have positive spin-off effects for the Southern African Development Community (SADC), COMESA and the tripartite process.
Experts say all the SACU member states have to grapple with a key policy debate, that of SADC’s ambition to eventually become a customs union as the five SACU countries are all members of SADC, while Swaziland is also a member of COMESA, which launched its own customs union in June 2009.
“Unless Swaziland acts like Ethiopia, which currently applies a 10% reduction on tariffs and has commissioned a study to estimate the effect of further reductions on the national economy, the SACU threats might create hazards for Swaziland,” said Fakudze. He said this was more especially because Namibia and Swaziland were currently consulting SACU so as to comply with their obligations of tariff reduction.
Adding, Fakudze said the most important implication to monitor was a bridge of any of the treaties, as most believed it was quite strange to be a member of multiple customs unions.
Asked on the implications for Swaziland if it were to be pressured into choosing one customs union, he said; “Some caution would have to be exercised whenever there is an undertaking.
“Otherwise, both customs unions stand to oppose any subsidies that distort or threaten to distort competition in the form of preferential treatment to the producers to encourage the production of a particular commodity or taking certain steps that would affect inter-trade between member countries.”
Fakudze said, for instance, any member country was entitled to apply a compensation fee on an imported product from another member country to counteract a direct or indirect subsidy amount imposed on exports or production of similar products in the country of origin according to the regulations set by the council.
Adding, another economist said the collapse of SACU could either be a move away from integration or strengthen SADC, as the foremost regional organisation that also includes South Africa.
Noted
It must be noted that while the COMESA customs union was launched in 2009, implementation has somewhat stalled. Former Uganda Revenue Authority Customs Commissioner Peter Malinga, who later worked for COMESA, said the European Union (EU) eventually withdrew its technical support after five years of no progress.
“This was after the first three years elapsed and COMESA was given a two-year extension for implementation of the customs union, which also elapsed, resulting in the funds being withdrawn,” he said recently during a workshop in Arusha, Tanzania.
Malinga said there was no outcome even after five years of the process but “just meetings held and nothing tangible being done, hence no implementation”. However, a Tripartite Free Trade Agreement between and among SADC members and COMESA is envisaged to be launched in June this year, with expectations of a larger market of around 625 million people, representing 58% of Africa’s GDP.
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Putting trade at the heart of poverty-reduction policies in Africa
Sixty policy makers from 15 least developed countries in Africa came together to discuss mainstreaming trade into national policies aimed at reducing poverty.
A regional workshop on mainstreaming trade into national policies aimed at reducing poverty in least developed countries (LDCs), was organized by UNCTAD in Maseru, Lesotho on 31 March-1 April 2015.
The workshop was part of a project that UNCTAD's Division for Africa, Least Developed Countries and Special Programmes (ALDC) is implementing jointly with the Division on International Trade, Services and Commodities (DITC) to assist LDCs to better coordinate their trade policies and benefit from trade.
The workshop reviewed the national studies of the three pilot countries in Africa to arrive at a clear understanding of the mainstreaming trade measures into national policies, and the constraints facing the countries in their efforts to make trade an engine of growth and poverty reduction.
At the end of the workshop, recommendations on possible strategies and options to address these challenges were identified.
Mainstreaming trade into national plans and poverty-reduction measures involves the systematic promotion of mutually reinforcing policy actions across government department and agencies, creating synergies in support of agreed development goals.
Building productive capacities was identified as a critical element for the effective mainstreaming of trade policies into poverty-reduction measures, and in this context the key role of the Enhanced Integrated Framework (EIF) in supporting the trade mainstreaming process was emphasized. The EIF is a multi-donor programme, which assists LDCs in their efforts to play a more active role in the global trading system.
At the workshop representatives of the UNDP, the United Nations Department of Economic and Social Affairs and the EIF Secretariat briefed participants on the activities they undertake in support of LDCs.
Representatives of the following LDCs attended the event: Benin, Burundi, Chad, Djibouti, Ethiopia, Gambia, Guinea, Lesotho, Mali, Mozambique, Niger, Rwanda, Senegal, Uganda, and Zambia.
“Successful mainstreaming requires leadership, clarity of responsibility, a vision and political will to implement policies as planned,”Geremew Ayalew, Director General of the Trade Relation and Negotiation Directorate of the Ministry of Trade and Industry of Ethiopia, said.
The project focuses on six pilot countries, three from Africa (Ethiopia, Lesotho and Senegal), and three from the Asia-Pacific region (the Lao Peoples’ Democratic Republic, Kiribati and Myanmar). Ultimately it will form the basis of a manual that will guide LDCs that wish to place trade policy at the heart of their national development strategies.
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The fiscal role of multinational enterprises: towards guidelines for Coherent International Tax and Investment Policies
Intense debate is ongoing in the international community on the fiscal contribution of multinational enterprises (MNEs). The focus is predominantly on tax avoidance – notably in the G20/OECD project on Base Erosion and Profit Shifting (BEPS).
Policymakers and experts at work in the BEPS process have so far not quantified the value at stake for government revenues, nor have they established a baseline for the actual contribution of MNEs. We estimate the contribution of MNE foreign affiliates to government budgets in developing countries at $730 billion annually. This represents, on average, around 10% of total government revenues. Contributions through royalties on natural resources, tariffs, payroll taxes and social contributions, and other types of taxes and levies are twice as important as corporate income taxes.
Notwithstanding their overall role as contributors to government revenues, MNEs, like all firms, aim to minimize taxes. MNEs build their corporate structures through cross-border investment. They will do so in the most tax-efficient manner possible, within the constraints of their business and operational needs. The size and direction of foreign direct investment (FDI) flows are thus often influenced by MNE tax considerations, warranting an investment perspective on tax avoidance.
Such an investment perspective puts the spotlight on the role of offshore investment hubs as major players in global investment. Around one-third of cross-border corporate investment – FDI, plus investments through Special Purpose Entities (SPEs) – is routed through offshore hubs before reaching its destination as productive assets. (UNCTAD FDI data excludes SPE investments.)
The root-cause of the outsized role of offshore hubs in global corporate investments is tax planning, although other factors can play a supporting role.MNEs employ a wide range of tax avoidance levers, enabled by tax rate differentials between jurisdictions, legislative mismatches, and tax treaties. MNE tax planning involves complex corporate structures which often rely on entities in offshore hubs.
Tax avoidance practices by MNEs are a global issue relevant to all countries: the exposure to investments from offshore hubs is broadly similar for developing and developed countries.However, profit shifting out of developing countries can have a significant negative impact on their sustainable development prospects. Developing countries are often less equipped to deal with highly complex tax avoidance practices because of resource constraints or lack of technical expertise.
The leakage of development financing resources is significant. An estimated $100 billion of annual tax revenue losses for developing countries is related to inward investment stocks directly linked to offshore hubs. The estimated tax losses represent around one-third of corporate income taxes that would be due in the absence of profit shifting.
The aggregate figures disguise country-specific impacts. Tax avoidance practices by MNEs and international investors lead to basic issues of fairness in the distribution of tax revenues between jurisdictions that must be addressed. At a particular disadvantage are countries with limited tax collection capabilities, greater reliance on tax revenues from corporate investors, and growing exposure to offshore investments.
However, in tackling tax avoidance, policymakers should be aware that the potential value at stake – taking into account the total contribution of MNEs as well as the fiscal discounts actively provided by governments in the form of incentives to attract investment – is almost ten times larger than the revenue leakage. This is not considering the value at stake in terms of much needed new productive investments.
Taking action on tax avoidance will have effects on international investment that must be considered carefully. Ongoing anti-avoidance discussions in the international community pay limited attention to investment policy. On the one hand, the role of investment in building the corporate structures that enable tax avoidance is fundamental. Therefore, investment policy should form an integral part of any solution. On the other, any policy initiative tackling tax avoidance by international investors is likely to affect national and international investment policies.
A set of principles and guidelines for Coherent International Tax and Investment Policies may help realize the synergies between investment policy and initiatives to counter tax avoidance. Key objectives of the 10 guidelines we propose for discussion include: removal of aggressive tax planning opportunities as investment promotion levers; mitigation of the impact on investment of tax avoidance measures; recognition of shared responsibilities between investor host, home and conduit countries; acknowledgement of links between international investment and tax agreements; and understanding of the role of both investment and fiscal revenues in sustainable development.
» Read a summary of the new UNCTAD report by Alex Cobham: UNCTAD study on corporate tax in developing countries
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Mugabe: Zimbabwe is ‘open for business’
Zimbabwe’s President Robert Mugabe assured hundreds of businesspeople that his country was “open for business”.
The 91-year-old statesman also encouraged entrepreneurs to establish truly black, African businesses.
If it is going to be black ownership, African ownership, “it must be truly so,” said Mugabe.
He criticised entities that were not truly black and African owned. The day prior, Mugabe disputed reports that he was in South Africa to beg for help.
Mugabe and South Africa’s President Jacob Zuma opened the inaugural South Africa Zimbabwe Business Forum in Pretoria on Thursday, 9 April.
In attendance were hundreds of delegates from both countries, including Zimbabweans who are permanent residents in South Africa.
The address kicked off Mugabe’s third day in South Africa on his first official visit in 21 years. Afterwards, he visited Soweto, where he shook hands with some residents.
Zuma’s ‘urgent and crticial’ call
On Thursday morning, Zuma spoke of South Africa’s black economic empowerment policy, when addressing members of the business community packed into the hotel venue.
“It is urgent and it is critical,” said Zuma of economic transformation, strongly advocating for black ownership and more industrialists.
Zuma listed the demographics of businesses listed on the Johannesburg Stock Exchange (JSE) which he said accounted for only 3 percent of entities listed.
However, when Zuma stated the same figure in his State of the Nation Address at the beginning of the year, several economists quibbled it.
They cited a JSE statement suggesting black ownership of the top 100 companies had increased to 23 percent. In February, presidential spokesperson Mac Maharaj said the 3 percent figure Zuma used was based on “direct ownership” and “direct shareholding”.
“If you live on shares and companies, you are not in control. We want industrialists who own and control the economy,” Zuma said on Thursday.
While he recognised the challenges posed by the global economic crisis and instability in the oil sector, Zuma was optimistic about the economic outlook in Africa.
Elephant in the room
Neither Zuma nor Mugabe acknowledged poor economic growth in Zimbabwe, or noted growth figures predicted for 2015, which the IMF had previously suggested would be poor.
Rather, both president’s speeches hinged on the promise of binational partnership and growth opportunities.
“Our two countries have an opportunity to capitalise on our countries’ abundant natural resources,” said Zuma.
He encouraged business owners to develop goods using raw materials, in a manner that would benefit the people of South Africa and Zimbabwe.
“You are meeting today to cement these trade relations and explore new opportunities in these two countries,” he said.
New importing horizons
Towards the end of his address, which lasted well over an hour though scheduled for only 15 minutes, Mugabe predicted a possible Zimbabwean market for goods produced in South Africa.
Mugabe said, “There is no way we can say we will never import from South Africa, no.”
According to a report in The Economist in February and the International Monetary Fund (IMF) Zimbabwe’s predicted growth for 2015 would be weak.
“Growth has slowed down and we expect it to weaken further in 2015,” said head of an IMF review team Domenico Fanizza in March.
Reuters reported Zimbabwe’s foreign debt was $9-billion (around R109-billion).
Mugabe’s assurance
Zuma’s speech focused on memoranda of understanding signed by ministers from both states the day before.
Both presidents encouraged their audience to broker deals that would mutually benefit both states.
“You have both national tasks and the task of the region: to change economically,” Zuma told the crowd of Southern African entrepreneurs.
Mugabe concluded his address by assuring businesspeople that his country was open for business.
While he said they would not find jobs in Zimbabwe, they could establish their own offices in the country, and broker partnerships.
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World Bank President outlines strategy to end poverty, welcomes new development partners
World Bank Group President Jim Yong Kim on 7 April 2015 announced a broad strategy to end extreme poverty by 2030, and he welcomed emerging players such as the Asian Infrastructure Investment Bank and the New Development Bank, established by the BRICS countries, as potentially strong allies in the economic development of poor countries and emerging markets.
“If the world’s multilateral banks, including the Asian Infrastructure Investment Bank and the New Development Bank, can form alliances, work together, and support development that addresses these challenges, we all benefit – especially the poor and most vulnerable,” said Kim. “It is our hope – indeed, our expectation – that these new entries will join the world’s multilateral development banks and our private sector partners on a shared mission to promote economic growth that helps the poorest.”
“I will do everything in my power to find new and innovative ways to work with these new institutions.”
Speaking today at the Center for Strategic and International Studies (CSIS) in Washington in advance of the World Bank/IMF Spring Meetings, Kim noted that to achieve the World Bank’s twin goals – ending extreme poverty by 2030 and boosting shared prosperity among the poorest 40 percent in low- and middle-income countries – “there is more than enough work to go around.”
The new multilateral banks could help bridge financing gaps in areas such as infrastructure, energy, and water, said Kim. “We estimate that the world needs an additional US$1 to 1.5 trillion dollars every year to be invested in infrastructure – roads, bridges, railways, airports, and energy plants. By 2030, we will most likely also need 40 percent more energy and face a 40 percent shortfall of water – pressures that may well be further accelerated by climate change.”
Kim hailed the substantial development progress over the past 25 years. “In 1990, when the world population was 5.2 billion, 36 percent of the world lived in extreme poverty. Today – with 7.3 billion people – an estimated 12 percent live in poverty. Over the past 25 years, the world has gone from nearly 2 billion people living in extreme poverty to fewer than 1 billion.”
However, Kim noted that there are still nearly a billion people living on less than US$1.25 a day.
“Few of us can even imagine what this must be like. Let’s remember what poverty is. Poverty is 2.5 billion people not having access to financial accounts. Poverty is 1.4 billion people without access to electricity. Poverty is also putting your children to bed without food. And poverty is not going to school because everyone in the family needs to earn a few cents each day.”
To meet this challenge, Kim outlined a strategy to end extreme poverty, based on the best global knowledge now available, that he summed up in three words: Grow, Invest, and Insure.
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“The world economy needs to grow faster, and grow more sustainably. It needs to grow in a way that makes sure some of our vast wealth goes to the poor.”
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“The second part of the strategy is to invest – and by that, I mean especially to invest in people through education and health.”
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“The final part of the strategy is to insure. This means governments providing social safety nets as well as building systems to protect against disasters and the rapid spread of disease.”
Kim said there was no single blueprint for countries on how they deploy the three-pronged strategy to end extreme poverty, but that it pointed to priorities for the future.
“First, agricultural productivity must increase. Second, we must build infrastructure that provides access to energy, irrigation, and markets. Third, we must promote greater and freer trade. Fourth, we must invest in the health and education of women and children. And fifth, we must implement social safety nets and provide social insurance, including initiatives that protect against the impact of natural disasters and pandemics.”
2015 is the most important year for global development in recent times, said Kim, and the decisions made this year will have an unprecedented impact on the lives of several billion people across the world for generations to come.
“In July, world leaders will gather in Addis Ababa to discuss how we will finance our development priorities in the years ahead. In September, world leaders come together at the United Nations to establish the Sustainable Development Goals – a group of targets and goals set for 2030 – just 15 years from now. And in December, leaders of countries again will gather in Paris to work out an agreement based on government commitments to lessen the severe short- and long-term risks of climate change.”
The end of extreme poverty is in reach, Kim stated, but to achieve this ambitious goal would require greater collaboration between governments, the private sector, and multilateral development bank partners, including the Asian Infrastructure Investment Bank and the New Development Bank.
“The decisions we make this year, and the alliances we form with other institutions in the years ahead, will help determine whether we have a chance to reach our goal of ending extreme poverty in just 15 years.”
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Transformation, inclusive growth a priority
Deputy President Cyril Ramaphosa says radical economic transformation and inclusive growth remain core priorities for government.
Speaking at the third Annual Premier Business Awards on Thursday, the Deputy President said the country’s policy of broad based black economic empowerment played a key role in increasing the participation of previously disadvantaged groups in the mainstream economy.
He said the black industrialists programme sought to unlock the potential of black entrepreneurs in a way that contributes to the reindustrialisation of the economy.
“As government, we will continue to strive to make it easier for companies to grow, to invest and to create more decent jobs for South Africans,” said the Deputy President.
He added that the manufacturing sector played a pivotal role in ensuring economic growth as it had the potential to create jobs.
“Government has put in place various mechanisms to support manufacturing,” he told those attending the glittering awards at the Sandton Convention Centre.
Deputy President Ramaphosa said the gathering intended to honour the spirit of entrepreneurship and as well as to recognise excellence among the country’s entrepreneurs.
“The business people we are honouring tonight keep the wheels of our economy turning. They don’t only create wealth and work but they also create hope and opportunity.”
The Deputy President’s comments were reiterated by Trade and Industry Minister, Rob Davies, who said running a lucrative business was no easy feat and that the awards – which were inaugurated in 2013 – acknowledged people who contributed to the development of the economy.
However, Deputy President Ramaphosa noted that the South African economy still faced profound challenges that require a coherent response from all social partners.
The economy, which has structural deficiencies, needs to grow at a faster rate to create jobs and eliminate poverty.
The Deputy President also took the time to encourage South Africans to rally behind the work of the Proudly South African and the Buy Back South Africa campaign while also urging business to embrace transformation.
Business, he said, is not solely about profits. “Enterprise is not just an economic good; it is also a social good. As you build your businesses please consider how they can contribute to building social cohesion.”
The awards, which are hosted by the Department of Trade and Industry (dti), Proudly South African and Brand South Africa, saw various businesses being honoured in nine categories that ranged from Young Entrepreneur Award, Exporter Award and Women Owned Business Award, among others.
Some of the winners in the categories were presented with awards by Minister Davies as well as Small Business Development Minister Lindiwe Zulu.
This year’s discretionary Lifetime Achievement Award was awarded by the Deputy President and Minister Davies to business woman, Dr Anna Mokgokong.
The Lifetime Achievement Award recognises an individual who has contributed significantly to the economic development of South Africa during their lifetime.
Dr Mokgokong has previously been voted as one of the leading women entrepreneurs in the world.
In receiving her award, the ecstatic Mokgokong said: “Thank you South Africa for making me what I am today to get this award which I believe belongs to all the people of South Africa who have really battled in corporate South Africa to make it.”
Mokgokong also paid tribute to the dti for formulating policies that have created an enabling environment for business to thrive
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Impact of falling oil prices on developing countries examined at Commodities Forum
The spectacular fall in prices for oil and other commodities since mid-2014 and what it means for resource-rich developing countries will be among key issues discussed by participants of UNCTAD’s sixth annual Global Commodities Forum at the Palais des Nations in Geneva on 13-14 April.
From recent highs of approximately 100 dollars per barrel in June 2014, oil prices dropped precipitously to less than 50 dollars in early 2015, which is also a 40 per cent drop from the 10-year average of just over 80 dollars. The government budgets of oil-producing developing countries are particularly vulnerable to such price movements.
For example, at the height of the supercycle, the governments of Angola, Nigeria and Chad drew 70 per cent or more of their revenues from their oil sector. Revenues plunged as prices dropped, forcing these governments to slash spending, freeze construction of new projects and delay the payment of civil servants’ salaries.
Among the sessions at the Forum will be a debate on the prospects for renewable energy sources in a lower-carbon energy mix, given the recent fall in oil prices.
In addition to the fall in oil prices, movements among other commodity prices have been generally down by 10 to 50 per cent from their 10-year averages. For example, in early 2015, iron ore prices were down 50 per cent and rubber prices down 37 per cent from their 10-year averages.
These price trends are of particular concern to commodity-dependent developing countries, which rely heavily on the income from their commodity exports.
More generally, lower prices squeeze the income available for distribution throughout the value chain. This can create tension among stakeholders and undermine policies enacted during the supercycle of high commodity prices.
Two keynote speakers will outline the key issues for debate throughout the Forum. Philippe Chalmin, President of the Cyclope market analysis service and a professor at Dauphine University in Paris, will identify some of the key forces behind the recent mutations on markets, with a view to understanding how they will impact stakeholders.
Yilmaz Akyuz will deliver a second keynote address. A former director at UNCTAD, Mr. Akyuz is the Chief Economist at the South Centre and he will share his ongoing research on governments’ macroeconomic management of the recent commodity boom cycle. Although many commodity exporting countries enjoyed sustained growth during the period, their policies had limited success in converting this growth into, for example: a diversification of their economies, a deepening of their capital markets or a reduction in their indebtedness.
In view of the recent fall in the oil price, a debate on the prospects for renewable energy sources in a lower-carbon energy mix will be among the sessions that follow the keynote speeches. The session seeks to emphasize that government policies are important in establishing investment incentives, such as fiscal concessions, to promote renewable energy technologies. In parallel, budget constraints due to lower oil prices may represent an opportunity for governments to reduce or eliminate their consumption subsidies for petroleum products.
The plenary themes to be considered through panel discussions and open debates over the two-day event are:
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Prospects for transparency-themed governance reform in the Swiss commodity trading sector
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Policy space for resource-rich developing countries in the trade of raw materials
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New dynamics in international agricultural commodity trade policies
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The prospects for renewables in a lower-carbon energy mix
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End of the supercycle? Implications for development and terms of trade
The 2015 Global Commodities Forum, “Trade in commodities: Challenges and opportunities”, will open with addresses by UNCTAD Secretary-General Mukhisa Kituyi and UNCTAD Trade and Development Board President Ana Maria Menéndez Pérezof Spain.
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China, South Africa chart direction for stronger legislative ties
Leaders of top Chinese legislature and South African National Assembly reached agreements on building stronger legislative ties on Tuesday.
The agreements came out of the talks between Zhang Dejiang, chairman of the Standing Committee of the National People’s Congress (NPC) and South Africa’s National Assembly Speaker Baleka Mbete. They cover the two legislative bodies’ role in seeking strong political relations, mutually beneficial trade and economic collaboration, solid people-to-people ties and close cooperation on international issues.
The talks are also part of the third meeting of the regular exchange mechanism between the NPC and South Africa’s National Assembly, which Zhang said aim to enhance the legislative cooperation and implement the consensus between the leaders of the two countries.
Zhang called for the two legislative bodies to make good use of the exchange mechanism and lay a solid political cornerstone of China-South Africa relations.
He pledged to work with the South African National Assembly to review the legal documents concerning bilateral cooperation and create a good legal environment for business collaboration and people exchanges.
Mbete, who is on a week-long China visit, said the cooperation plan for the next five to ten years reached by the two presidents has injected a new vitality into South Africa-China all-round strategic partnership.
She called on the exchange and cooperation between the two legislative bodies to stay in tune with the growth of the state-to-state relations.
She pledged the South African National Assembly’s commitment to working with the NPC to implement the consensus of presidents, share more experience on state governance, legislature and supervision and seek more coordination in multilateral parliamentary organizations.
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At thematic debate, UN chief urges efficient private sector funding for post-2015 development
The international community needs a financial framework capable of confronting the multifaceted crises of the day in a predictable and effective manner if it is to delineate a successful post-2015 sustainable development agenda, UN Secretary-General Ban Ki-moon confirmed.
Delivering the opening remarks to the UN General Assembly’s Informal Interactive Hearing for the Third International Conference on Financing for Development on 8 April 2015, the Secretary-General told the gathering of delegates and private sector professionals that channelling both public and private sector cash flows into sustainable development initiatives would be “crucial for securing an ambitious post-2015 agenda.”
“All sources of funding must be tapped – public and private, national and international,” Mr. Ban declared. “Domestic resource mobilization will be crucial.”
However, he noted, numerous obstacles in facilitating financing remained. In many countries, attempts to raise public resources through taxation continued to be hampered by loopholes, tax avoidance and tax evasion while private international capital flows also suffered from volatility.
In addition, the global financial crisis had further exposed the risks and underlying vulnerabilities in the international financial system, increasing inequalities, environmental challenges and rendering states susceptible to shocks such as the recent Ebola epidemic.
“The world needs an international financial framework that is predictable and effective in meeting these challenges and achieving sustainable and inclusive development,” continued Mr. Ban. “We invite the private sector to be our partners in supporting and financing this agenda, including through partnerships and collaboration.”
This year marks wrap up of the landmark UN Millennium Development Goals (MDGs), which world leaders agreed on 15 years ago. There has been significant progress in meeting the targets. For example, global poverty has been halved well ahead of the 2015 deadline; in developing countries, 90 per cent of children now enjoy primary education; the number of people lacking access to improved drinking water has halved, and the fight against malaria and tuberculosis has shown results, according to the UN.
But challenges persist, and with the deadline of the MDGs set for the end of this year, the UN will craft a new set of targets known as the sustainable development goals (SDGs). Globally, 73 million young people are looking for work and many more are trapped in exploitative jobs. In recent years, more than two and a half million more children in affluent countries fell into poverty, bringing the total above 76 million.
In a statement delivered on behalf of Sam Kutesa, the President of the UN General Assembly, Nicholas Emiliou, Acting President of the UN General Assembly, similarly called on Member States and all stakeholder to ensure that accessed resources are utilized “effectively and efficiently.”
“While businesses should take into account profit and shareholder value, they have opportunities to realize long-term success contributing towards achievement of sustainable development, including through partnerships and collaboration with the public sector,” stated Mr. Emiliou.
He added that today’s hearing provided a “unique opportunity for an in-depth exchange of views” on important themes directly impacting the planet’s new development agenda.
“Mobilizing financing for critical infrastructure such as energy, transport, water and sanitation, as well as for [small and medium enterprises], is instrumental for structural transformation, economic growth, social inclusion and environmental sustainability,” Mr. Emiliou said.
Meanwhile, as he urged private sector leaders to join the UN and Member States at the upcoming Third International Conference on Financing for Development to be held in Addis Ababa later this year, Mr. Ban explained that the international system needed to create better incentives and a regulatory framework that would enable investors and companies to better align their strategies with economic, social and governance issues and report on their progress.
“We need to continue to expand partnerships with the business sector, civil society and other stakeholders, and to lever your resources and unique skills,” concluded the Secretary-General, who added that world sat at the brink of “a very important historic moment.”
“We need your advocacy, expertise, and ingenuity to make Addis Ababa a success and to chart a new era of sustainable development.”
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African islands meet to address climate change and disaster risk challenges
Representatives of African Small Island Developing States (SIDS) have convened in Addis Ababa for a two-day workshop to develop a collaborative framework for support to address the challenges of climate change and manage disaster risks.
The workshop is being held at the UNECA Headquarters under the auspices of the Climate for Development Africa (ClimDev-Africa) Programme, a joint initiative of the African Union Commission (AUC), the Africa Development Bank (AfDb) and the Economic Commission for Africa (ECA)’s African Climate Policy Centre (ACPC) a unit of the UNECA’s Special Initiatives Division (SID), which serves as the Secretariat for the ClimDev-Africa programme responsible for establishing the policy basis of the joint initiative.
The workshop aims to provide African SIDS with support to address the urgent challenges posed by climate change and seize opportunities in emerging areas related to the transition towards blue and green economies that are aligned to development aspirations.
The gathering is a follow up to a scoping mission to Cabo Verde, Union of the Comoros, Guinea Bissau, Mauritius, Seychelles and, São Tomé and Príncipe, undertaken by ACPC upon request from the African SIDS. The mission assessed their climate change adaptation and mitigation needs; identified priority interventions aimed at building country resilience to climate change and the means to address residual loss and damage.
Africa’s six SIDS are highly vulnerable to climate change and related extreme weather-induced disasters that make it difficult for them to attain their development goals.
“The impact of climate-related extreme events is likely to increase as the effect of climate change intensifies, but there is also much that is and can be done to build resilience to climate change in these six countries,” says Fatima Denton, Director of the Special Initiatives Division. “There is a need to develop capacity to undertake effective long-term dynamic adaptation planning and implement decision-making mechanisms to manage multi-sectoral risks that they face and enable SIDS to make their transitions to blue and green economies,” she said.
It is anticipated that a joint work programme will be developed at the end of the workshop linking the priority SIDS needs to the ClimDev Africa programme of work as a precursor to the latter providing concrete support to African SIDS to effectively manage the risks of climate change and also in anticipation of the momentous COP 21 where a successor treaty to Kyoto will be decided.
The ClimDev-Africa programme was established to create a solid data, analysis, technical and capacity building support foundation to respond to Africa’s climate change challenges and opportunities.
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Private sector joins push to raise African incomes through trade
Innovative efforts to dismantle trade barriers in East Africa provide a shining example of how the private sector can work alongside governments and nonprofits to help drive sustainable economic growth and lift people out of poverty.
The East African Community has made great steps toward stimulating trade in the region in recent years. Customs union and a common market mean that Burundi, Kenya, Rwanda, Tanzania and Uganda enjoy some of the most liberal trade relations on the continent. The five member states also qualify for duty-free access to the U.S. market under the African Growth and Opportunity Act.
However, underdeveloped infrastructure, nontariff barriers like rules and regulations, slow and uncertain transit times, and some of the highest transport costs in the world remain big challenges.
These have a direct impact on the poor – both as producers and consumers – explained Matt Rees, U.S. Agency for International Development deputy coordinator for Trade Africa.
They limit farmers’ access to agricultural inputs and raise food prices for the poor. Inefficient border operations and uninformed export bans prevent countries with surplus food from trading with neighboring countries that don’t have enough, which contributes to food insecurity.
“Reports indicate that East Africa produces enough food to feed East Africa,” Rees said. “[But] inefficient markets and [nontariff barriers] produce peaks and valleys in the food supply, leading to chronic food shortages and an approximately $1 billion a year requirement for food aid from the U.S. government alone in sub-Saharan Africa.”
East Africa’s major ports – Mombasa in Kenya and Dar es Salaam in Tanzania – need to improve their infrastructure and their efficiency, he argued. More also needs to be done to reduce nontariff barriers and fully implement EAC’s common market and customs union.
“Inefficient ports and poor roads are all bottlenecks for industry, dragging on national economies,” agreed Jens Munch Lund-Nielsen, head of emerging market projects at Maersk Group’s sustainability division.
“When a ship wastes time queueing and loading, or if you have trucks standing idle for hours or sometimes days, its goods are being delayed and that has a domino effect – it will delay payment, delay tax revenues and delay the reinvestment of capital,” he said.
There is also the danger that issues like this dissuade companies from investing in East Africa and creating jobs.
“Despite great improvement in infrastructure in recent years, reaching many rural areas and regional cities remains a challenge,” said Diageo spokeswoman Cecilia Coonan, who also flagged a “logistics gap.” Although this hasn’t stopped the British alcoholic beverages company from investing in Africa, Diageo needs an efficient transport network to ensure products reach its consumers, she noted.
Infrastructure investment and more integration
USAID’s East Africa Trade and Investment Hub and nonprofit partner TradeMark East Africa have already taken strides toward cutting the costs and time associated with regional transport.
Their work has, for example, helped reduce transit times from the port of Mombasa to Kampala and Kigali by an estimated 9 percent over the past 12 months alone, Rees said. Kenya’s government has committed to cutting transit times by an additional 30 percent over the next three years.
TMEA is also on track to complete the construction of 13 one-stop border posts at key border crossings along EAC trade corridors and to double container traffic capacity at the port of Mombasa by 2016, the USAID official said.
One of the key goals of USAID and TMEA is to galvanize private sector companies, whose technological prowess and industry expertise mean they are well-placed to help transform East Africa’s trade and logistics sectors, typically through a mix of financial investment, product development and technological transfer.
Private sector engagement in East Africa is key to TMEA meeting its target of creating 5 million jobs over the next five years, CEO Frank Matsaert said, adding that it is already “really engaged” with 400 to 500 companies across the region.
Projects where TMEA has already harnessed private sector power include an SMS system that allows businesses to report nontariff barriers via mobile phones, using software developed by Kenya’s Ushahidi platform.
TMEA is also talking to Maersk about ways it could bring its trading systems together on one “single window” platform that would probably be cloud-based.
That partnership will start with a trial to calculate how much time and money could be saved by digitalizing the documentation associated with a single container of avocadoes en route from a Kenyan farm to consumers in Europe, Maersk’s Lund-Nielsen said.
This process involves more than 30 stakeholders and 300 different interactions, many of which are delayed further by lengthy queues, he noted.
Although Maersk does not yet have the study results, “our immediate sense is that the documentation flow is just as costly as the shipment of the container – it’s probably even more costly,” he said. And in terms of delay, with perishable products in particular, “every day counts.”
Private sector companies can also help governments address trade barriers. Maersk, for example, has access to data and industry insight that can highlight bottlenecks in trade flows as well as help find solutions, Lund-Nielsen said.
Poor logistics are not the only barriers to trade that the EAC is helping overcome. Stronger regulatory integration means companies like GlaxoSmithKline PLC no longer have to painstakingly file product patents individually in each member state. New drugs therefore reach Africans faster, said Allan Pamba, GSK’s vice president for East Africa and African government affairs.
“It no longer takes 20 years to roll out a patent [in Africa],” he said. GSK is, for example, set to launch its latest HIV drug in Africa this year or next – just months after its European launch.
Private sector clout in driving integration
Following GSK’s announcement last year of plans to invest up to 100 million pounds ($147 million) to build up to five new factories in Africa and expand existing ones in Kenya and Nigeria, it received an “avalanche” of requests from African governments wanting GSK to pick their country for one of the plants, Pamba said.
GSK’s priority is that new factories are based in destinations that not only offer attractive economic conditions, but where products manufactured are able to reach a wider market, for example through that country harmonizing its product specification rules with those of neighboring African markets, he said. This “carrot” has incentivized governments to make more efforts in that direction.
Diageo also works closely with nongovernmental organizations, governments, private sector companies and other groups to support trade in Africa. One example is its support of Grow Africa’s work to develop agricultural systems by building strong value chains that benefit smallholder farmers, Diageo’s Coonan said.
It also works with “microdistributors” who are able to reach a wider network of consumers than traditional methods. In Kenya, for example, motorcycle distributors can reach rural areas and communities that would otherwise not be able to access its products.
“This approach enables local entrepreneurs to build their shop or bar business, as well as empowering the local distributors themselves,” she said.
WTO and beyond
As Africa prepares to host its first World Trade Organization ministerial meeting in December in Nairobi, TMEA is exploring ways it can “piggyback” interest in the event to highlight investment opportunities in East African trade and logistics.
One initiative will be a private sector summit that TMEA hopes to run alongside the meeting.
“The WTO ministerial is about magnifying the African voice in trade talks,” Matsaert said. “It’s really significant.”
Private sector companies are “really thinking about creating a compact – something beyond a compact that’s just there on paper, but will actually get real things done like job creation.”
Pamba plans to attend the meeting on behalf of GSK.
“We want to be at the table with everyone else, and bring others along, especially smaller and midlevel companies that are very common across the region,” he said.
Jobs and opportunities
While foreign aid has been beneficial to East Africa, trade creates employment, which in turn “gives people opportunities to provide for themselves,” Pamba said. It is “a way of helping [Africa] drive its way out of poverty, emancipate itself in many ways, and bring peace in many of these countries.”
Trade gives governments a solid tax base which, if used responsibly, drives social investment – for example roads, hospitals and schools. Raising living standards and employment opportunities can also help cut crime, he argued.
Every $1 invested so far through TMEA has yielded a $34 return, and much of this directly improves the lives of ordinary East Africans, Matsaert said.
Through its work with the Burundi Revenue Authority, for example, TMEA has helped the government double its tax revenue. This has given another 40,000 Burundians access to health care.
TMEA also works directly with informal traders, many of them women, improving their safety at borders and making them more aware of their rights.
USAID’s work on the EAC Simplified Certificate of Origin – an easy-to-use customs clearance document – has meanwhile helped small traders, mostly women, enter the formal trading sector. As well as saving them time and money, the SCO frees them from the risks of using traditional informal routes, Rees said.
TMEA does “direct poverty work” as well, targeting regional value chains – for example coffee farming – in which the poor are big stakeholders, Matsaert said.
“A lot of the work we’re doing is at grassroots level,” he noted. “It’s not just trickle down – it’s trickle up.”
Sectors that can benefit from AGOA
Agriculture is indeed one sector where the benefits of freer trade and faster, smarter, cheaper transport can reap big rewards for low-income communities. Farming provides livelihoods for the bulk of the region’s population and is critical to stamping out chronic food shortages. Improving regional trade in food staples improves food security, reduces price volatility and raises farmers’ incomes.
Other sectors in which East Africa has potential to competitively export under AGOA – and create income opportunities for the poor – include textiles, apparel, leather goods and floriculture, Rees explained.
Companies that have thrived under AGOA include Mombasa Apparel, which has so far met six U.S. buyers through the East Africa Trade and Investment Hub. By the end of 2015, the company will employ 14,000 Kenyans in the coastal region, “positively impacting the livelihoods of nearly 100,000 Kenyans,” he said.
Infrastructure investments also can have a massive impact on African economies, with tangible benefits for local businesses and the workers they employ, Lund-Nielsen said.
This can be illustrated by the Apapa Container Terminal, which Maersk unit APM Terminals took over in 2006. At that time, “the challenges were daunting – everything was rundown and trees were literally growing up through the equipment,” he said.
Due to the port’s inefficiency, ships had to wait an average 28 days when loading in Nigeria. Within three years of APM’s investment, this had been reduced to one day – a move that released $200 million into the local economy and created at least 30,000 jobs among the 20,000 local businesses that depend on the port for their services, he said.
Logistical innovations, such as using refrigerated “reefer” containers, are also improving livelihoods by extending the lives of perishable products such as flowers or fruits that are currently exported mostly by plane, Lund-Nielsen said.
In the case of Kenya’s avocado export industry, where Maersk is also training growers to pack their goods to international standards, this means such products can be transported by ship at a lower cost – a development that enables Africa’s mostly smallholder farmers to reach new markets in Europe at a competitive price, he said.
Trade liberalization and the integration of low-income countries into free trade pacts has helped lift millions of people above the poverty line over the past 20 years, Lund-Nielsen concluded.
This comes with a caveat, however.
“Trade is not a silver bullet,” he noted. “There’s no guarantee of socially inclusive growth, just because of trade. The gains from trade depend on how evenly it is distributed within a country.”
That is the litmus test against which efforts will ultimately be judged.
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Azevêdo: WTO has achieved a great deal over 20 years but “there is much, much more to do”
Director-General Roberto Azevêdo, in a speech at a conference of African Trade Ministers marking the WTO’s 20th anniversary in Marrakesh, Morocco, on 8 April 2015, said that “we need to do more to help developing countries, particularly in Africa, to use trade as a means to leverage growth and development … and we need to accelerate our negotiating work”. Positive outcomes in the major challenges and milestones facing the WTO this year “would be the best way to mark our 20th anniversary,” he added.
This is what he said:
Bonjour à tous.
Je suis très heureux d’être ici parmi vous aujourd’hui, au Maroc, pays dans lequel l’OMC a vu le jour.
Je vous remercie tous pour l’organisation de cet événement, placé sous le Haut Patronage de Sa Majesté le Roi Mohammed VI et pour le soutien que le Maroc a donné à l’Organisation au fil de ces 20 dernières années.
Il est évident que cet événement n’aurait pu avoir lieu dans un endroit plus parfait.
Le terme “Marrakech” en lui-même est devenu un synonyme de l’OMC.
It was here that the world came together to sign the Marrakesh Agreement and open a new chapter in economic history with the establishment of the World Trade Organization.
His Majesty King Hassan II made the point very well at the closing ceremony of the conference in April 1994 when he said:
“By bringing into being the World Trade Organization today, we are enshrining the rule of law in international economic and trade relations, thus setting universal rules and disciplines over the temptations of unilateralism and the law of the jungle […] Regardless of the size of our economies, from now on we shall all enjoy the same rights and be subject to the same obligations.”
Since that historic meeting in Marrakesh the WTO has expanded those principles and the rule of law by welcoming 33 new members.
These new members range from some of the world’s largest economies – including China and Russia – to some of the least-developed. Just earlier this month Seychelles completed its process of accession to become the WTO’s 161st member.
The vision of the WTO’s founders – of cooperation on trade that is truly global – is being realised.
Together WTO members now account for approximately 98% of world trade.
And so I think that today, when the global economy is more interconnected than ever, it is difficult to imagine a world without the WTO.
By setting the global trade rules, monitoring adherence to those rules, and helping to resolve disputes between nations when they arise, the WTO plays a crucial role in global governance.
The clearest example of this is probably found in the response to the recent financial crisis, the effects of which we are still living with today.
The lesson of history is very clear. When the world was hit by crisis in the 1930s governments responded by throwing up trade barriers, which pushed the world into a spiral of protectionism. In just four years, from 1929 to 1933, retaliatory trade restrictions wiped out two thirds of world trade. But the mistake was not repeated in 2008.
After the financial crisis hit seven years ago the value of world trade did fall, but the decline was only a fraction of that seen in the 1930s – and it rebounded straightaway.
Instead of a protectionist panic the response was one of restraint and caution – partly due to the steadying influence of the multilateral trade system.
Despite mounting domestic pressure to adopt protective measures, governments knew that they were bound by rules and obligations that were common to all, and this gave them confidence that others were going to play by the rules as well. Any improper unilateral trade action could have significant legal and economic consequences.
And so we avoided turning a damaging financial crash into an economic catastrophe.
So I think there is great value in the system.
Moreover, the WTO also does a great deal to help developing countries to integrate into the global trading system.
To me this is a top priority.
Indeed I think the centrality of developing countries within the WTO – and African countries in particular – is a defining achievement of the organization.
And this applies throughout our work, whether it is technical assistance to African countries to help them build capacity and engage in the WTO, or through the transparent and inclusive approach that we take to our negotiations.
All of our members have a seat at the table. All voices are heard. Decisions are taken together – by consensus. And, as His Majesty King Hassan II said, under the rules of the system, everyone is equal.
Today we have 42 African members – that’s a quarter of the entire membership – and others are in the process of joining.
Both individually, and together through the African Group, African members have used the system to further their interests.
And, by doing so, you have placed Africa at the heart of the organization.
We saw this very clearly at the historic ministerial conference in Bali in 2013 where members struck the first multilateral trade agreement since the WTO’s creation.
BALI
The fact is that Bali would not have happened without the support and advocacy of our African members. And the content of the decisions taken reflect this.
Bali brought progress on agriculture, including on public stockholding to support food security, and on cotton.
As developing countries requested it provided for a Monitoring Mechanism that will increase the WTO’s responsiveness to concerns on how Special & Differential provisions are used and implemented in the organization
Bali also delivered a package of decisions to support least-developed countries – incorporating steps on duty free quota free market access, guidelines on preferential rules of origin and reforms to enable services providers in LDCs to enjoy new export opportunities.
Members are now taking forward all of these issues. I was pleased, for example, that at a high level meeting in February, 25 members indicated services sectors and modes of supply where they would grant preferential treatment to LDCs.
Finally, Bali also delivered the Trade Facilitation Agreement.
It is estimated that this agreement will reduce trade costs by up to 15% in developing countries.
This is particularly important for Africa where the cost of customs procedures tends to be around 30% higher than the global average.
And, for the first time in the WTO’s history, there will be practical help with implementation. The Agreement states that assistance and support should be granted to help developing countries achieve the capacity to implement its provisions.
So, for those countries with less-developed customs infrastructure, the Agreement will mean a boost in the technical assistance that is available to them.
To ensure that this commitment is honoured, I worked with the African Group and others to create a new initiative: the Trade Facilitation Agreement Facility.
This facility will ensure that LDCs and developing countries get the help they need to develop projects and access the necessary funds to improve their border procedures, with all the benefits that that can bring.
The Facility is already operational. And donors are already very interested and involved.
And we have built strong partnerships with a number of organisations in support of this work, including the World Bank.
So I urge you to look at how this facility and the various other trade facilitation projects can support you.
And I urge you to ratify the Trade Facilitation Agreement.
For the Agreement to enter fully into force two thirds of WTO members must ratify it through their domestic procedures. Some members have already done so – but it is vital that others do the same, and quickly, so that the benefits of the Agreement can be realized as soon as possible.
TRIPS AMENDMENT
This call for ratification leads me onto another important issue where domestic action is required – and where, again, African members played a key role.
In the Doha Declaration on TRIPS and Public Health of 2001, Ministers tried to remove the barriers that some countries were having in gaining access to medicines.
They provided a waiver so that essential medicines could be exported into countries which could not produce the medicines themselves, without fear of action over intellectual property rights.
Led by African countries, members subsequently decided that this issue was too important for a waiver. They decided to provide a permanent pathway to ensure that access to these medicines was put on a firmer legal footing.
The UN General Assembly, the World Health Organization, UNAIDS and many others have signalled their support.
So now we need to bring this important change into force. And, as with the Trade Facilitation Agreement, two thirds of the WTO members have to confirm their acceptance before this can happen.
Over half of the membership have now done this.
In Africa, 10 members have confirmed the acceptance so far, but there are more than 30 yet to do so.
This is “Africa’s amendment” and so I urge you to do all you can to accelerate your domestic ratification processes and bring it into force.
THE WTO AGENDA
Looking back over the last 20 years and considering all the issues I’ve mentioned this morning, I think it’s clear that the WTO has achieved a great deal.
But we are not complacent. There is much, much more to do.
We need to do more to help developing countries, particularly in Africa, to use trade as a means to leverage growth and development.
And we need to accelerate our negotiating work.
While Bali was a major success, it is sobering to reflect that the bulk of our current trade rules were negotiated and agreed over 20 years ago when the organization was founded.
Despite the fact that many of those rules embody basic and perennial principles, the reality is that our legal texts are yet to properly enter the 21st century.
I am conscious that we need to deliver more outcomes, more quickly – and we will do everything we can to work with members to make this happen.
This brings me to what is happening at the WTO today.
At the end of 2014 all members recommitted to agreeing a work programme on the remaining issues of the Doha Development Agenda – and they committed to delivering it by July this year. This is the first and decisive step that will allow us to conclude the Round in the near future.
This means that the big, tough issues of agriculture, services and industrial goods are all back on the table.
And it means we have the opportunity to advance negotiations which have been stalled for some years.
Progress on the Doha Round could deliver a huge amount for Africa – so it is appropriate that our next Ministerial Conference is being held in Nairobi this December.
This is the first time, since the creation of the WTO in Marrakesh, that a ministerial meeting has been held in Africa. I hope that we can replicate the success that we had here!
So there is a lot at stake in these negotiations – and I think we have real momentum behind us.
We started an intensive process of talks in January and so far we have seen good progress and strong engagement.
In fact I think we made more progress in the first weeks of these talks than we did in all of 2014. And we have continued to make steady progress since then.
Members are engaging on the detail and are beginning to bring some new proposals to the table.
There is a clear sense that they are moving into a solution-finding mode.
This doesn’t mean that our work is done. We still need to bridge some very significant gaps.
Moving the Doha Development Agenda forward is still going to be incredibly difficult. There remain many challenges to overcome before we can find solutions – but at least now we are looking for them. And this we haven’t done for quite some time!
We will continue to push these efforts forward.
CONCLUSION
I think it is essential that we demonstrate once again – like we did in Bali – that the WTO can deliver.
Trade can be a powerful tool to alleviate poverty, support growth and boost development – so we should seek to use it in the most effective manner possible. The best way to do so would be to conclude these negotiations.
And so we have a big year ahead of us.
In addition to implementing the Bali Package and the TRIPS amendment on access to medicines, and agreeing the work programme on the DDA by July, there are a series of major challenges and milestones on the horizon:
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We have the Global Review of Aid for Trade at the end of June, when we will be discussing all of our technical assistance work in developing countries.
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There are the UN Summits on Financing for Development in July, and on the Post-2015 Development Agenda in September. Both will be important occasions to ensure that trade’s potential contribution to sustainable development is fully recognised.
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We have the annual WTO Public Forum in October.
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And of course we have our ministerial conference in Nairobi in December.
Positive outcomes in all of these areas would be the best way to mark our 20th anniversary. And, in each case, we look forward to your support and your engagement.
Selon les termes de l’Accord de Marrakech, nous devrions nous efforcer d’employer les relations commerciales afin “d’élever le niveau de vie” des peuples à travers le monde.
J’espère qu’ensemble, c’est ce que nous nous attèlerons à faire.
Thank you for listening.
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7th Africa Carbon Forum: The Road to Paris 2015
The Road to Paris 2015 (COP 21) – Promoting access to low-carbon development in Africa
Ministers from governments across Africa will gather at this year’s Africa Carbon Forum (ACF) on April 13-15 in Marrakesh, Morocco, to step up momentum towards a new, universal climate change agreement in 2015. They will also highlight the region’s readiness and requirement for accelerated private and public financing of low-carbon development.
With countries set to approve a new climate change agreement in Paris in December, this year’s ACF has taken on added significance with inclusion of a high-level segment hosted by the Government of Morocco.
The ministers are expected to consult on their contributions to the agreement via their Intended Nationally Determined Contributions (INDCs) while exploring and encouraging greater opportunities for low-carbon development.
Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, said: “A visionary agreement in Paris can, in concert with an inspirational suite of sustainable development goals, assist in further unlocking Africa’s inordinate potential for clean, green, low-carbon development. The Africa Carbon Forum is an ideal venue for ministers and experts to weigh options, policies and pathways that can fast track the finance, mechanisms and markets needed to realize these aims.”
ACF supports Africa’s participation in global carbon markets and its access to green investment with a range of conference sessions, side events and networking opportunities. Participants will be briefed and receive training on:
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Identification of Intended Nationally Determined Contributions to climate change action challenges and opportunities;
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Low carbon development opportunities;
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Trends in international carbon markets;
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Finance and project opportunities, for example from the Green Climate Fund;
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Efforts to increase demand for carbon credits generated by the Clean Development Mechanism (CDM); and
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Opportunities in results-based financing.
The forum is organized by the United Nations Framework Convention on Climate Change (UNFCCC), United Nations Environment Programme (UNEP), along with the UNEP-DTU Partnership, World Bank (WB), African Development Bank (AfDB) and International Emissions Trading Association (IETA).
Alex Rugamba, Director of the Energy, Environment and Climate Change Department at the African Development Bank, said, “The Africa Carbon Forum avails us an ideal platform as stakeholders to share knowledge and solutions to climate change impacts that impede Africa’s development. At this year’s ACF, we look forward to an engaging agenda that further clarifies expectations towards COP 21 from an African perspective.”
The Africa Carbon Forum 2015 builds on the success of last year’s forum in Windhoek, Namibia, which attracted some 400 policy-makers, project developers and investors. Participants exchanged views, shared knowledge and learned the latest about international and national policies and operational issues related to carbon markets, mechanisms and finance.
The forum is organized under the umbrella of the Nairobi Framework, which was launched in 2006 by then UN Secretary-General Kofi Annan with the aim to assist developing countries, especially those in Sub-Saharan Africa, to improve their level of participation in the CDM.
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African think tanks: influence and sustainability
With all the research and knowledge think tanks conduct and amass, it would be fair to assume they have great influence on policy. But this is not the case for all, heard the over 100 delegates at the 2nd Africa Think Tank Summit taking place in Addis Ababa.
“How have you as think tanks exploited private public partnerships to influence policy?” Mr. Stephen Karingi, Director for Regional Integration and Trade at the ECA, posed the question to the 65 African think tanks represented. He gave examples of successes, failures and missed opportunities highlighting “getting African leadership to be committed to intra Africa trade” as one of the think tanks’ greatest achievements in impacting policy.
Despite missing opportunities to influence policy during the beginnings of the post-colonial era, where the continent suffered “a hang-over of geopolitical divide,” witnessed by placing national interests before regional or continental concerns, Mr. Karingi praised African think tanks for making leaders aware that “the potential for intra African trade is huge.”
The capability to influence exists in many forms, however, Mr. Karingi advised think tanks to avoid distraction offered by emerging problems and concentrate on research and policy shaping for long-term development. He also encouraged think tanks to form coalitions across nations to have more resonance.
Cross-border and regional collaborations; strong partnerships and networks not only aid the influence level of think tanks; they also enhance their sustainability, according to Mr. John Omiti, Executive Director at the Kenya Institute for Public Policy Research and Analysis. He pointed out sustainability is further affected by funding, quality of think tank personnel and impartiality.
On funding, Ms. Eugenia Kayites, the Executive Director of the Institute of Policy Analysis and Research, urged think tanks to balance between resource mobilization and their own mandate. Her think tank talked directly with policy makers and came up with a strong marketing strategy to raise their own funds through, for example, training other organisations. Losing government funding can be blessing in disguise as it pushes think tanks to “focus on core competencies,” she said.
Getting money into the coffers of a think tank is a road filled with difficulties and traps but it does not need to be so, Ms. Josephine Ngure of the African Development Bank told delegates. Like all organisations who take pride in their work, think tanks fear loosing their autonomy and operational independence because of influence from donors.
Although it is difficult to achieve both intellectual and financial autonomy, “autonomy has to be backed by intellectual power and think tanks must strive to have intellectual autonomy that can be used to leverage credibility,” advised Ms. Ngure.
Referring to partnerships between think tanks and the private sector, delegates stressed, “Africans have to see value in the think tanks” in order to donate to them. Think tanks are encouraged to demonstrate continued value addition and seek out policy makers’ discourse if they want to want to attract funding.
In other discussions, think tank representatives were urged to adopt technologies due to their impact and potential to exert greater influence. Technologies are getting smaller, faster and more powerful and that's the competition that think tanks face, stated Mr. Jim McGann from the Think Tanks and Civil Societies Program at the University of Pennsylvania. Other participants also stressed the need to embrace marketing technics and do more to understand the realities on the ground.
“Think tanks must be willing to adapt to a changing world; they must understand the realities of the African people in order to sustain their relevance, especially in critical areas such as terrorism and economic development,” said Mr. Abdalla Hamdok, Deputy Executive Secretary, ECA.
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Development aid stable in 2014 but flows to poorest countries still falling
Development aid flows were stable in 2014, after hitting an all-time high in 2013, but aid to the poorest countries continued to fall, according to official data collected by the OECD Development Assistance Committee (DAC).
Net official development assistance (ODA) from DAC members totalled USD 135.2 billion, level with a record USD 135.1 billion in 2013, though marking a 0.5% decline in real terms. Net ODA as a share of gross national income was 0.29%, also on a par with 2013. ODA has increased by 66% in real terms since 2000, when the Millennium Development Goals were agreed.
Bilateral aid to the least-developed countries fell by 16% in real terms to USD 25 billion, according to provisional data. Much of this drop is explained by exceptionally high debt relief for Myanmar in 2013, but even excluding debt relief ODA to the poorest countries fell by 8%. Bilateral aid is channelled directly by donors to partner countries and equates to roughly two-thirds of total ODA.
“I am encouraged to see that development aid remains at a historic high at a time when donor countries are still emerging from the toughest economic crisis of our lifetime,” said OECD Secretary-General Angel Gurría. “Our challenge as we finalise post-2015 development goals this year will be to find ways to get more of this aid to the countries that need it most and to ensure we are getting as much as we can out of every dollar spent.”
A survey of aid donor countries’ spending plans through 2018 points to a dip in country-programmable aid – aid that is planned in advance for country programmes – in 2014 but with programmed increases starting in 2015.
The survey indicates that country-level aid to the poorest countries should recover over the next few years after several years of declines, in line with a pledge by DAC members in December 2014 to reverse the fall in aid to countries most in need.
“ODA remains crucial for the poorest countries and we must reverse the trend of declining aid to the least-developed countries. OECD ministers recently committed to provide more development assistance to the countries most in need. Now we must make sure we deliver on that commitment,” said DAC Chair Erik Solheim.
Five of the DAC’s 28 member countries – Denmark, Luxembourg, Norway, Sweden and the UK – continued to exceed the United Nations target of keeping ODA at 0.7% of GNI.
Thirteen countries reported a rise in net ODA, with the biggest increases in Finland, Germany, Sweden and Switzerland. Fifteen DAC members reported lower ODA, with the biggest declines in Australia, Canada, France, Japan, Poland, Portugal and Spain.
Looking in addition at several non-DAC members who also reported their aid flows to the OECD body, the United Arab Emirates posted the highest ODA/GNI ratio in 2014 at 1.17%.
ODA makes up more than two thirds of external finance for least-developed countries. The OECD will call at the International Conference on Financing for Development in Addis Ababa in July for more of this money to be used as a lever to generate private investment and domestic tax revenues in poor countries. OECD work on combatting tax avoidance and illicit financial flows out of least-developed countries also aims to reduce dependence on aid.
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Video: Filling the infrastructure gap in Africa
William Mwanza, researcher from the Trade Law Centre (tralac), was interviewed on CNBC Africa on 27 March 2015, looking at how we are filling the gaping hole that is infrastructure on the continent.
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Kagame, Kikwete warm up for Central Corridor
The issue of trade barriers in the East African Community (EAC) could soon be history based on the effort that the region’s leaders are investing on it. The focus is now on removing Non-Tariff Barriers on the so-called Central Corridor to ease the free movement of goods and services in the community. And there is a bonus.
The initiative on the Central Corridor has brought Tanzania and Rwanda closer. It is a departure from when Rwanda, Uganda, and Kenya came together to fast track the integration projects and speculation swarmed that they were moving to sideline other member countries especially Tanzania and Burundi.
Presidents Paul Kagame, the Tanzanian President Kikwete, and Burundian leader Pierre Nkurunziza and other top government officials from the region on March 26 attended the first ever Central Corridor heads of state meeting in Dar es Salaam.
The Central Corridor gateway is a highway that connects the landlocked countries of Burundi, Rwanda, DR Congo, and Uganda from the port of Dar es Salaam in Tanzania through Dodoma to Kigali in Rwanda, Bujumbura in Burundi. It also connects to Mutukula in Uganda. It is the second major route in the region and is considered as a heart for Rwandan imports and exports as 60 percent of Rwandan goods go through the port of Dar es Salaam.
President Kagame while addressing the forum reiterated the political will as the only required mantle to have the region move forward. “For initiatives of this scale and importance, there is no substitute for engaged leadership. Frequent consultations at the highest level will help drive focus and results and we will maintain and even strengthen this coordination mechanism. Political will, needs to be translated into tangible results. The prosperity of East Africa demands it and together we can achieve it,” he said. The head of a state further stated that it was imperative for the involvement of all the stakeholders in ensuring a regional growth by increasing investments through public-private partnership.
“This is about mutually beneficial and profitable investments, for all stakeholders involved, whether public and private. No investment is risk-free. And all the positive trends, and goodwill, in the world, do not guarantee success. We need to set the agenda, communicate it and build the mutually-beneficial public-private partnerships to get things done,” Kagame said.
The Tanzanian President Jakaya Kikwete pledged to ensure the efficiency at the port; including effective clearance of goods destined to landlocked countries.
He observed that integration was the only way to move the community forward and added that it is vital for member countries to fight existing trade barriers that hamper trade and investment in the region.
“The best and easiest way to realise continental unity and integration, in Africa, is through regional integration as building blocks. A divided East Africa will not be able to claim its rightful place and earn respect in the family of nations in Africa and the world,” he said.
This is seen as a historical move by heads of state in the region with so far the commitment shown yielding positive results especially on Northern corridor.
“We have been suffering with corrupt officials along the central corridor asking for bribes, insecurity has also negatively impacted us but with the new commitment by heads of state I think it will be an opportunity for goods to sail freely on this corridor,” says Issa Mugarura, a truck driver and the vice-president of Rwanda Long Distance Drivers Union (ACPLRWA).
Kagame who was the guest speaker at the presidential High-Level Industry and Investors Forum later flagged off block trains from the central railway line that would run from Dar es Salaam to Kigali.
It’s reported that in 2014 about 630,000 metric tonnes of cargo destined to Rwanda passed through the Dar es Salaam Port, which is higher than 235,000 metric tonnes of cargo destined to Rwanda that passed through the Dar es Salaam port in the previous year. The East African Community (EAC), which groups the five countries, said in a 2015-2025 strategy document it needs between $68 billion and $100 billion over the next decade to build roads, ports, railways, transmission lines and oil and gas infrastructure.
Already, some joint programmes; including the use of Identify cards to move, the Single Tourist Visa, and removal of roaming charges to access communication, appear to be paying off.
Other projects include the Mombasa-Kigali Standard Gauge railway that is envisaged to be operating by 2018 and Dar railway line connecting to Kigali. They are likely to ease the transportation of goods and lower prices.
It was agreed that a regional taskforce comprising officials from all Central Corridor member states will be set up to coordinate the preparation of the selected 22 transnational priority infrastructure projects to be developed and implemented in phase one.
The project was launched during the World Economic Forum in Davos in January, last year, and was identified as a programme for acceleration of investment through private sector participation among 51 projects under programme for Infrastructure Development in Africa-Priority Action Plan. The Central Corridor is the nearest route to Rwanda and is about 1,700 kilometres long, extending from Bujumbura through Kigali to the coastline at Dar es Salaam port. The Northern Corridor, which is about 1,900 kilometres, and stretches from Bujumbura through Kigali, Kampala and Nairobi to the port of Mombasa. It takes three days for the cargo truck to land in Kigali from Dar port while in Mombasa it spends five days.
The next Presidential Round Table will be held in August. This is similar to the Northern Corridor where officials convene every three months to assess the progress in implementing the decisions taken by heads of state. With both corridors now operating smoothly, it is hoped there will be a positive impact on the economies in the region; especially the landlocked countries like Rwanda.