by Arnold Kransdorff
When the modern history of Africa is written, economic historians will be asking several uncomfortable questions. Why, over almost 50 years, did the "Aid Industry" never learn from its own experiences? Even, why did it not learn from the tried and tested experience of every other developed country?
The answers will explain why the developed world has wasted trillions of dollars on the world's biggest investment fiasco – and, puzzling, why it continues to do so.
When aid started in the 1960s, the money was intended to grubstake the continent's development out of the colonial era. Countries were poor but not hungry. Today, African countries remain poor, and much of its population starving.
Now considered as an entitlement, the West's largess totals almost $700 billion, equal to several trillion dollars at today's rates. Equivalent to around seven post-World War II Marshall Plans, this is expected to rise by a further $47 billion by 2010, excluding the billions in unconditional cheap loans from China.
For the naive Westerner, the reasons for this waste of resources are baffling.
The answers come in a new book entitled "Saving Africa!" by John Hollaway. He explains that Africa has not adapted its survival mechanisms to modern times. Throwing money at it has done little except encourage massive corruption – which Africans now also deem as their right (they call it "rent seeking," which the Ethiopian prime minister publicly let slip in September 2000 was the "centrepiece" of African economies) – and a chronic dependency culture.
Hollaway explains that Africa's main impediments are its topsoil and resident life-threatening diseases. The former leaches easily and gives rise to the continent's historic need to be nomadic, while the latter has necessitated relentless procreation to survive. The result is that indigenous wealth is based on livestock ownership, fecund wives and child numbers. His perceptive answer, puzzlingly never seriously considered outside academia, is to release its land – particularly agricultural land – into private ownership, not as leasehold but freehold. Hollaway explains that leasehold may provide access but it does not bestow ownership, a distinction that seems to have passed everyone by.
Overall, there is private land ownership in some cities but virtually nothing in rural areas except in South Africa, which is busy deciding how it can revert. English-speaking countries have the most while land occupancy in French- and Portuguese-speaking regions is mainly leasehold. Generally, governments of whichever colonial origin can declare arrangements void (as in Zimbabwe), so subsistence farming is all that occurs. Land, he insists, must not be communal, which means that the power of tribal chiefs and governments has to diminish.
Such a move would, unlike cows, wives and offspring, provide a more tradable form of personal wealth that could be used as surety for borrowing and which could eventually replace the traditional form of wealth. Importantly, it would allow individuals to create an investment economy without the need for philanthropy. Where the concept becomes even more practical now is with Africa's huge black diaspora, who could divert some of their accumulating foreign earnings into helping to self-fund this conception, as in Zimbabwe, where exiles are erecting new urban suburbs through black market forex deals that provide local currency at upwards of 45 times (yes, 45) the official exchange rate. In similar fashion, Zimbabwe's political elite buy foreign currency at the official rate. They then stealthily procure black market dollars also to enter the vigorous property market, fully realizing that if they did to urban what they're doing to rural, much of their wealth would disappear.
Even though it's on the back of currency windfalls from imposed economic failure, the triumph of individual avarice over official policy confirms that the lawmakers have perfectly understood freehold's principle and that wider Africa's choice to retain 19th century perceptions of wealth for their electorates is disingenuous.
But how does Africa achieve cultural change, when land to an African politician is perceived as irreversibly communal – and, very conveniently, their source of absolute power? Does the Aid Industry declare that enough is enough and, literally, leave Africa to Charles Darwin? Or do they accede to the continent's very own Oliver "Please, sir, can I have some more" Twist?
Hollaway's answer is to experientially learn from the rest of the developed world as well as China, which has belatedly allowed peasants qualified ownership of their land. All have used individual property rights as the basis of their development by providing a bottom-up source of wealth. Subsistence plots could be bought, sold and consolidated into more commercial operations capable of feeding urban populations. Then, with the means acquired, jobs could be generated. Importantly, the cycle is self-generating and wealth is not dependent on the favor – usually family or tribe-directed – of whoever is top dog.
For his roadmap, Hollaway suggests tough love. Because of Africa's xenophobia, Africans themselves, in particular the continent's black diaspora, have to front the efforts to change their homeland cultures by asking their native governments to adopt freehold policies. In fact, lawmakers would be told that development assistance would be entirely dependent on citizen ownership of land. Possibly using an international agency as their initial operating umbrella, the diaspora and talented locals would be offered opportunities to train in the skills to create a marketplace for land (a central registry, a state-run escrow system, estate agencies, etc.). Incentives would be offered for expatriates to return home, and human nature should then be left to make the best of opportunities. It would be at this stage that aid be resumed.
Pilot projects in suitably peaceful and homogeneous countries such as Mozambique and Burkina Faso would be started. If these worked, a "me too" chant elsewhere in Africa would deafen the dissent of resistant politicians.
Given freehold's success in dozens of other, equally different, cultures, there is a comprehensible sensibility in Hollaway's arguments that needs to be seriously considered and fleshed out further. It won't be a smooth run, but anything is better than more of the same.
White Africa never learned that the pride of ownership is the mother and father of hard work and quicker learning, a confirmation of which comes in the more graphic portrayal by Larry Summers, ex-president of Harvard: "Ownership matters; there has never been a case in recorded history of anybody washing a rented car." Neither did it learn that many people with some money would provide more overall wealth than a few with lots of money. Black Africa has been smugly making the same mistake. Freehold could be a direct path to self-sufficiency, replacing long-dead feudalism. Exchanging the traditional measures of wealth would also reduce the instinctive drive for huge families and the related tragedy of HIV/AIDS. And for well-meaning Gordon Brown, some pop stars, comics and China – all of whom also seem disinclined to experientially learn – further trillions of others' money would not have to be wasted.
WorldNetDaily.com
September 30, 2007
Europe lags behind China, India in African deal-making
Europe is lagging behind Asian economic powers China and India in the race to snap up trade and investment deals in resource-rich Africa, Senegalese President Abdoulaye Wade said.
Addressing students at the John F. Kennedy School of Government in Boston, Wade also complained of excessive delays and red tape in investment projects offered by Western investors and institutions like the World Bank.
Chinese and Middle Eastern companies could often do the job quicker, he said, while referring to trade and investment offensives in Africa by China and India, which are hungry for raw materials to feed their fast-growing economies.
"You know, Europe, which is an old civilisation, can't keep up with the pace of either China or India on the trade front," the Senegalese leader said.
Traditionally a staunch ally of the West, former French colony Senegal has been awarding lucrative investment contracts to Middle Eastern, Asian and African firms - often at the expense of its traditional trade partner France.
In June, Dubai port operator DP World won a contract worth at least 400 million euros ($566 million) to operate and develop container port facilities in the Senegalese capital Dakar, beating a French competitor.
Senegal granted a mobile and fixed-line telephone operating licence to Sudan Telecommunications Co. (Sudatel). Sudatel became Senegal's third mobile operator in an award which ended the fixed-line and Internet monopoly of Sonatel, whose major shareholder is France Telecom.
Observers expressed surprise over the choice of Sudatel, given Western condemnation of Sudan over the conflict in Darfur, where some 200,000 people have been killed since 2003 in political and ethnic bloodshed.Wade was blunt about what he called "too much bureacracy" in the development of projects by institutions like the World Bank. "Once I was building a highway, and the World Bank was ready to participate, but it was going to take time. I sent a delegation to China and in the 16 following days China decided to build the highway," he said.
But while many African governments praise Beijing for its "no strings attached" approach to international aid and trade for developing countries, Western officials says China cuts corners by ditching safeguards against corruption and abuses.
Wade made clear he welcomed fast delivery of projects, and offered the Dakar port development contract as an example. "We launched an international tender, a French company said it would build the port by 2020. Dubai said it would start in 2008 and finish in 2012," he said.
Wade, who is hosting an Organisation of the Islamic Conference summit in Dakar next year and has launched an ambitious public works programme to showcase it, said he believed in a broad array of relations for his country.
"I am playing a very open game," he told his audience.
Reuters
Ivory Coast to increase port capacity
Ivory Coast plans to pump more than $230 million into West Africa's biggest port to increase capacity and accommodate bigger ships in anticipation of a post-war economic revival, a port official said.
Activity slowed at Abidjan's state-controlled port when a 2002-2003 civil war left the northern half of the world's top cocoa producer under rebel control, causing landlocked countries to the north to turn to other regional ports to move goods. Now that a March peace accord has breathed new life into national reconciliation moves, the port hopes to capitalise by recovering lost business from these expanding economies, said its head of communications, Faustin Toha.
The expansion project involves building quays, warehouses and roads on the Ile Boulay, a virtually undeveloped strip of land in Abidjan's Ebrie Lagoon, where the port is located.
Construction work could begin as early as 2008 but no clear timetable has been elaborated as yet. President Laurent Gbagbo has said the project would cost around 75 billion CFA ($162 million), of which two thirds were available now.
The former French colony, which has a smaller port in the western town of San Pedro, is rich in agricultural and mining resources and also has a small but growing crude oil industry.Resource-hungry Asian giants China and India are expanding their presence here and elsewhere in West Africa while Iran has also sent delegations to Abidjan to discuss trade.
Toha said Abidjan's container port, managed by SDV, the local unit of SDV Logistics International and French industrial conglomerate Bollore Group, was more efficient than some other ports, avoiding costly delays for shippers. "We can unload containers quickly and there are no tailbacks. In some ports the ships have to stay out at sea," until the port is ready for them, he said.
The entire port can now handle 60 ships at a time.
Despite steps to reunite the country after the civil war, marine insurance companies still demand shippers pay a war-risk surcharge imposed following days of anti-French rioting in November 2004, in which around 8,000 expatriates fled Abidjan.Toha said the surcharge should now be scrapped after President Laurent Gbagbo named rebel leader Guillaume Soro prime minister under a March deal to reunite the country through disarmament and long-delayed elections now due next year.
"If the country has found peace again, insurers should understand there is no reason for these taxes," Toha said.
Reuters
EU attacks NGOs for anti-EPAs stance
The European Commission has accused non-governmental organisations of "playing poker" with Europe's former colonies by urging them to reject new trade pacts.
The 78 member ACP group and the European Union are struggling to clinch new agreements by the end of the year, when current preferential market access is due to expire.
To mark the five years since the negotiations were launched, many pro-development pressure groups have mobilised to protest against the new economic partnership agreements.NGOs such as ActionAid and Oxfam have accused the European Commission of threatening the development of ACP countries by allegedly strong-arming them to sign the new trade pacts.
In an open letter to NGOs, EU Trade Commissioner Peter Mandelson and Development Commissioner Louis Michel said: "Calling for an end to ... negotiations when there is no credible alternative is playing poker with the livelihoods of those we are trying to help."
In a reaction to the letter, Oxfam said in a statement: "The (Commission's) claim that they are being flexible is belied by their behaviour in the negotiations." he NGO added that the EU "continues to insist on the deadline and reiterate demands in areas such as services, investment and government procurement, that would have negative implications for development."
With the year-end deadline looming ever larger, the EU sought in April to boost the negotiations with an offer to scrap all tariffs and quotas on ACP countries' exports, with the exception of sugar and rice.
The agreements are supposed to help ACP countries develop while they diversify their economies and meet WTO requirements that they allow for some opening of their markets to European goods and services.
Africasia
Ghana's aluminium industry threatened by imports
Ghana's aluminium industry is in danger following the influx of sub-standard products into the local market.
Ghana’s standard for the thickness of aluminium sheets for roofing is 0.40mm. However, the market in Ghana now has thicknesses as low as 0.25mm.
The President of the Association of Ghana Industries (AGI), Tony Oteng-Gyasi,said the competitive advantage of Aluworks Limited, a manufacturer of high quality aluminium sheet products in Ghana, was gone. “For the first time in its history, Aluworks’ 2007 half year results were not pleasant,” he lamented.
Apart from the sub-standard aluminium products in the market, the AGI President also mentioned high import duty as another major problem facing the sector. He said following the shut down of VALCO this year, Aluworks had to import aluminium ingot (a raw material for the manufacturing of aluminium products) with an import duty rate of five per cent, adding that the same rate applied to semi-finished aluminium products such as coil, discs and flat sheets.
Mr Oteng-Gyasi further hinted that Asian manufacturers had established warehouses in West Africa where they sent the semi-finished goods to, and then use ECOWAS trade protocols to move them around West African countries including Ghana. The AGI President blamed the woes of the aluminium sector on regulators, “for not devising appropriate policies to protect the industry from unfair competition. “We have to strengthen our standards authority and all regulatory bodies especially in the area of enforcement.”
Oteng-Gyasi attributed the poor response from the industry to unfair competition in the form of imported sub-standard goods to an expensive operating environment.
“Ghana is supposed to be pursuing an export-led growth strategy in view of its small domestic market. Export of primary products would not let us reach and sustain our goals, especially in view of the volatility of world market prices.” He said since Ghana was in a sub-region where manufacturing was relatively undeveloped, the country should aim at becoming a low-cost manufacturing centre in order to satisfy the West African market.
Mr. Oteng-Gyasi suggested that tariff setting be based on a scientific approach so as to offset actual local cost disadvantages. He further stated that the situation where every change in tax rate or administrative charges required Parliamentary action was slow and cumbersome.
“We need to be a manoeuvrable economy, able to respond fast to the actions of competing economies.”
Modern Ghana
Ghana’s standard for the thickness of aluminium sheets for roofing is 0.40mm. However, the market in Ghana now has thicknesses as low as 0.25mm.
The President of the Association of Ghana Industries (AGI), Tony Oteng-Gyasi,said the competitive advantage of Aluworks Limited, a manufacturer of high quality aluminium sheet products in Ghana, was gone. “For the first time in its history, Aluworks’ 2007 half year results were not pleasant,” he lamented.
Apart from the sub-standard aluminium products in the market, the AGI President also mentioned high import duty as another major problem facing the sector. He said following the shut down of VALCO this year, Aluworks had to import aluminium ingot (a raw material for the manufacturing of aluminium products) with an import duty rate of five per cent, adding that the same rate applied to semi-finished aluminium products such as coil, discs and flat sheets.
Mr Oteng-Gyasi further hinted that Asian manufacturers had established warehouses in West Africa where they sent the semi-finished goods to, and then use ECOWAS trade protocols to move them around West African countries including Ghana. The AGI President blamed the woes of the aluminium sector on regulators, “for not devising appropriate policies to protect the industry from unfair competition. “We have to strengthen our standards authority and all regulatory bodies especially in the area of enforcement.”
Oteng-Gyasi attributed the poor response from the industry to unfair competition in the form of imported sub-standard goods to an expensive operating environment.
“Ghana is supposed to be pursuing an export-led growth strategy in view of its small domestic market. Export of primary products would not let us reach and sustain our goals, especially in view of the volatility of world market prices.” He said since Ghana was in a sub-region where manufacturing was relatively undeveloped, the country should aim at becoming a low-cost manufacturing centre in order to satisfy the West African market.
Mr. Oteng-Gyasi suggested that tariff setting be based on a scientific approach so as to offset actual local cost disadvantages. He further stated that the situation where every change in tax rate or administrative charges required Parliamentary action was slow and cumbersome.
“We need to be a manoeuvrable economy, able to respond fast to the actions of competing economies.”
Modern Ghana
Nigeria-South Africa trade grows
Nigeria has emerged as South Africa 's biggest trading partner in West Africa, and its third in Africa after Mozambique and Zimbabwe, reports Nigeria's official News Agency of Nigeria (NAN).
The news agency quoted Dianne Games, chief executive officer of the South Africa-Nigeria Chambers and Commerce (SA-NCC) in an interview in Johannesburg, South Africa.
"South Africa's export to Nigeria have grown from 291 million rand (348,000 U.S. dollars) in 1998 to 4 billion rand (143 million dollars) in 2006. Import, mostly oil, has nearly doubled in a year from 4.2 billion rand (143.3 million dollars) in 2005 to 9.3 billion rand (286 million U.S. dollars) in 2006," Games said.
Despite the growing trade ties, Nigeria has proved to be a difficult business destination for South Africans for a range of reasons, she said. She said vastly different cultures, unpredictable business environment, high costs of doing business, logistics and perception problems are some of the difficulties being encountered in Nigeria.
Games said, however, that South Africa would soon challenge Nigeria's traditional trading partners such as the United States, Britain and other European partners in terms of overall trade. "South Africa is offering skills, goods and services on a par with Western countries, but are able to undercut their prices," she said.
She further explained that the interest of South African companies, both small and large, had grown rapidly in the past two years. "The trend of funding local partners has also developed as trust has grown between companies in both countries," Games said.
She attributed the increased volume of trade to the strong political ties between the two countries. "South Africa-Nigeria Bi-national commission has met on six occasions and more than 15 agreements to facilitate trade and investment have been signed although it has not been active in the past few years," she added.
Xinhua
The news agency quoted Dianne Games, chief executive officer of the South Africa-Nigeria Chambers and Commerce (SA-NCC) in an interview in Johannesburg, South Africa.
"South Africa's export to Nigeria have grown from 291 million rand (348,000 U.S. dollars) in 1998 to 4 billion rand (143 million dollars) in 2006. Import, mostly oil, has nearly doubled in a year from 4.2 billion rand (143.3 million dollars) in 2005 to 9.3 billion rand (286 million U.S. dollars) in 2006," Games said.
Despite the growing trade ties, Nigeria has proved to be a difficult business destination for South Africans for a range of reasons, she said. She said vastly different cultures, unpredictable business environment, high costs of doing business, logistics and perception problems are some of the difficulties being encountered in Nigeria.
Games said, however, that South Africa would soon challenge Nigeria's traditional trading partners such as the United States, Britain and other European partners in terms of overall trade. "South Africa is offering skills, goods and services on a par with Western countries, but are able to undercut their prices," she said.
She further explained that the interest of South African companies, both small and large, had grown rapidly in the past two years. "The trend of funding local partners has also developed as trust has grown between companies in both countries," Games said.
She attributed the increased volume of trade to the strong political ties between the two countries. "South Africa-Nigeria Bi-national commission has met on six occasions and more than 15 agreements to facilitate trade and investment have been signed although it has not been active in the past few years," she added.
Xinhua
September 27, 2007
West Africa's share of EU trade declines
West Africa’s share of trade with the European Union (EU) has declined significantly from 5% in 1980 to 1% today, the First Counsellor of the Delegation of the European Commission to Ghana, Dr. Dick Naezer, has said.
He said this deterioration was due to the use of the General Trade Preference system for the past 30 years that had not helped in the development of Africa.
In place of this, Naezer explained that the Economic Partnership Agreements (EPAs) would do the trick as the EU will seek to support the economic reforms of governments throughout Africa by changing the market relationship between Africa and European markets.
“We are currently negotiating EPAs with African sub-regional groupings which aim at creating a business-friendly environment,” he said. He said the EPAs would create vigorous inter-regional exchanges, promote exports, provide a predictable regulatory framework for investors, remove non-tariff barriers and strengthen institutional capacities.
“It will also support trade facilitation, better communication and lessen bureaucracy,” he assured, adding that he hoped the agreement would be concluded before next year.
Ghanaian Chronicle
South African companies storm Nigeria
The Palms shopping center in Lagos is the largest mall in sub-Saharan Africa. It is managed by a South African company, Broll, and most of its stores - Game, Shoprite, NuMetro, Nandos - are South African brands. The largest mobile-phone company in Nigeria? It, too, is South African: MTN, which has captured nearly 50% of the market.
Indeed, in Nigeria these days South African businesses are everywhere. Entech, a South African engineering firm, is leading a $3 billion redevelopment of Lagos's Bar Beach and Victoria Island waterfront. Another South African firm, Group Five, is building a power station in the Niger River delta.
September 26, 2007
Reluctant Africa feels trapped into signing EPAs
Africans are reluctant to sign new trade deals with Europe that would open the floodgates to cheaper, subsidised products - but some analysts say they can't afford to refuse.
The European Union (EU) and former European colonies are negotiating new trade and investment agreements to replace preferential deals the World Trade Organisation has ruled illegal and says must be scrapped by the end of the year.
Faced with the end of favourable market arrangements dating back decades, Africa is in a catch-22 situation. Experts say long-term growth is at risk if the continent spurns a global trend towards liberalisation, but its fragile industries are also threatened with closure if they do.
Economic Partnership Agreements (EPAs) will ensure continued tariff-free exports to Europe, but many Africans say the deals would, in turn, flood their markets with cut-price goods, killing domestic production. Already, some African nations have felt that pinch because of an influx of cheap Chinese goods.
The debate has whipped up so much opposition that anti-poverty campaigners are planning protests for Sept. 27, dubbing it the global "Stop EPAs Day."
Across the continent, the examples of potential threats are myriad and especially dangerous for countries that lack diversity in their exports.
If EPAs are not in place by Dec. 31, affected African firms will face European import tariffs of at least 8 percent. Other exports could face tariffs of between 5 percent and 25 percent.
Others are less optimistic. The west African trade bloc, ECOWAS, has said talks are likely to drag into 2008.
Campaigners accuse the EU of pressuring poor nations to sign without giving them room to discuss an alternative, even though many of them lack the expertise to push their interests. "It's a David and Goliath situation," said Laura Merrill, an Oxfam fair trade official in Nairobi.
She urges Africans to demand a stop-gap agreement to protect their industries until they are ready to sign the EPAs.
One temporary solution could be the General System of Preferences (GSP+) that allows countries to protect products on which their economies depend for an agreed period. About a dozen Latin American and Asian producers benefit from GSP+ deals that let them export to Europe without dismantling the bulk of their tariffs.
"Ghana is very qualified for that," said Tetteh Hormeku, head of programmes at Third World Network, a non-governmental organisation in Ghana. "We would be able to export and we wouldn't need to remove tariffs on 80 percent of products."
The standard GSP attracts a higher tariff compared to the preferential treatment that comes into expiry at the end of this year. Both GSP and GSP+, trade experts say, come with stiff requirements that have to be met by African, Caribbean and Pacific (ACP) countries in order to be eligible for these preferences. Currently no ACP country is eligible for the GSP+ option, which has lower tariffs, compared to GSP.
Though the EC has maintained that it would provide ACP countries with a standard GSP scheme, which attracts a higher tariff than the Cotonou ACP preference, trade experts are advocating for a GSP+ regime that would provide lower tariffs. They argue that ACP countries should be exempted from some of the requirements mandatory for the GSP+ ,as was the case with Latin American countries, who were given a transitional period to ratify and implement the requirements.
For instance, there are two sets of criteria for GSP+ eligibility: one on vulnerability and another on human-labour rights and environmental principles. They requires a country to have initially ratified and implemented at least 23 out of 27 relevant conventions by the end of 2008.
On the first requirement of vulnerability, trade experts say, all ACP countries appear to be eligible, but on the second one it is rather difficult to fulfill the requirement, given that the ratification and implementation should be met by 2008.
Technocrats argue that for ACP countries to be provided with an effective fallback, the GSP+ must be accorded temporarily to all non-LDC ACP states from January in order to avert disruption of trade. They say this would give all parties enough time to either finalise EPAs, or to ratify and implement the remaining conventions needed to establish permanent eligibility.
Not all African countries stand to automatically lose their European markets on Jan. 1, in the absence of new pacts. In fact, 33 out of the continent's 53 countries will still enjoy secured access under an "Everything But Arms" trade pact.
Nigeria, Ghana, Ivory Coast, Kenya and Mauritius are among the nations that do not fall under that category.
"We will never grow if our industries have open competition with those from Europe," said Isaiah Kipyegon, an official of the Norwegian Church Aid advocacy group. "EPAs are an oppressive tool seeking to liberalise trade in all that we live on in Africa."
Reuters/East African Business Week
Why Africa needs aid for trade
By Pascal Lamy and Donald Kabruka
*Pascal Lamy is director-general of the WTO and Donald Kaberuka is president of the African Development Bank.
The East African
For many developing countries, trade has been a vital instrument for reducing poverty and raising levels of development. One need only look at Korea, Malaysia, Singapore and China to see how trade can help raise living standards.
But many other developing countries have yet to derive the same level of benefits from a global trading system, which could provide them with a route to economic growth. One important reason for this is that many developing countries, not least in Africa, lack the technical and institutional capacity to successfully integrate into the system.
To address this problem, governments around the world are establishing a financial assistance partnership dedicated to building trade capacity in the developing world. From October 1-3, the African Development Bank will host trade, finance and development ministers in Dar es Salaam to build support for the global Aid for Trade initiative in which the World Trade Organisation plays a central role.
The meeting — one of three regional Aid for Trade meetings to be held — is designed to encourage beneficiary countries to make trade a greater development priority and to encourage aid donors to scale up trade-related development assistance.
Aid for Trade is needed to train developing country trade officials so that they can more effectively participate in WTO activities. But it is also needed to improve trade-related infrastructure in Africa, to help African countries implement commitments they will make in the Doha Round while providing adjustment assistance necessary to reform trade regimes.
All governments agree that an Aid for Trade package is no substitute for an ambitious and development-oriented Doha agreement. By reducing trade barriers and paring back distorting subsidies, an agreement would create real opportunities for African businesses in the world marketplace.
But if entrepreneurs are to take advantage of these opportunities, they will need help. African trade is growing — trade has multiplied nearly five times in 20 years and exports have raised an average of 15 per cent annually since 2000 — but the continent’s share of world trade still lags behind. In 1950, Africa’s share was 10 per cent, but today its share hovers at less than 3 per cent. With exports of goods and services having grown 20 fold to more than $14 trillion since 1950, a return to a market share of 10 per cent would mean a vast expansion of resources. But this will not come without effort and money.
Infrastructure and enhanced Customs procedures are two solutions to improving African trade performance. Africa suffers from underdeveloped roads, ports, railways and telecommunications systems. The cost of telephone connectivity in Africa is higher than anywhere else.
African freight costs as a percentage of total import value are 13 per cent compared with 8.8 per cent for developing countries elsewhere and 5.2 per cent for industrialised countries. In Kenya, the average cost of importing one container is nearly $2,500 or five times more than the cost in Singapore. The operating costs per kilometre of using two axle trucks in Tanzania are two and half times the costs in Indonesia or Pakistan.
Fixing these infrastructure deficiencies will not be cheap, but the potential benefits are immense. The World Bank estimates that to build roads linking Africa’s capitals and major cities would cost $20 billion and another $1 billion a year in maintenance. But the bank also estimates that such infrastructure improvements could boost trade by $250 billion within 15 years, with the rural poor being major beneficiaries.
Other capacity building programmes require fewer funds but offer equally important gains. An average Customs transaction in Africa requires the involvement of 20-30 different parties, 40 documents and 200 data elements.
Customs delays in Africa average 11.3 days, compared with 7.2 days in Latin America and 5.5 days in Asia. There is a direct correlation between such delays and a country’s trade volume. Reducing such delays to six days could result in a 10 per cent rise in African exports.
An agreement on trade facilitation arising from the Doha round would help by streamlining global Customs procedures but African governments will need money to train Customs officers and to computerise operations.
The economic problems facing Africa are diverse and complex. Addressing these problems will require a great deal of determination and commitment from all sides. But such efforts are essential if we are to bring Africa in from the sidelines of the global economy.*Pascal Lamy is director-general of the WTO and Donald Kaberuka is president of the African Development Bank.
The East African
Uganda should be cautious about signing EPA
by Belinda Were*
Negotiations have been running since September 2002 between the European Union (EU) and the African Caribbean and Pacific (ACP) countries on Economic Partnership Agreements (EPAs). The negotiations will close in three months. They will result into new free trade agreements under which ACP countries will have preferential access to the European markets.
It is disturbing that awareness among the public as regards EPA negotiations is still very minimal yet these negotiations impact greatly on our economy and livelihood.
It is unlikely that the ACP countries will gain better access to the European market. Rather, local industries will be put under severe strain by competition from cheap European imports, which are often subsidised. The European Commission's own impact assessment notes that EPAs could lead to the collapse of the manufacturing sector in some African countries.
The issues that developing countries worked hard to get rid of at the WTO are the same bottlenecks EU is pushing for. ACP countries face further constraints on policy-making while European corporations gain new powers. The experience with bilateral investment treaties between ACP and European countries shows that investment agreements do not by themselves attract foreign capital; what matters are infrastructure, market size and human capital.
The Cotonou Agreement intended that EPAs contribute to regional integration. However, regional integration projects are being undermined where the poorest countries are put in a no-win situation. They either maintain their non-reciprocal access to the European market under the 'Everything but Arms Programme' but leave their regional grouping, or stick with their regional partners and open their market to the EU.
The EPA negotiations appear unwelcoming for ACP countries and a number of civil society groups are calling for EU member states to take action to create fair play for developing countries. The government should look into Uganda's performance as an economy and determine if we can stand the heat. Give-and-take mentality must be withdrawn from the EPA negotiating mandate and some issues rejected to have fair play.
*The writer is a student of Makerere University
New Vision
Negotiations have been running since September 2002 between the European Union (EU) and the African Caribbean and Pacific (ACP) countries on Economic Partnership Agreements (EPAs). The negotiations will close in three months. They will result into new free trade agreements under which ACP countries will have preferential access to the European markets.
It is disturbing that awareness among the public as regards EPA negotiations is still very minimal yet these negotiations impact greatly on our economy and livelihood.
It is unlikely that the ACP countries will gain better access to the European market. Rather, local industries will be put under severe strain by competition from cheap European imports, which are often subsidised. The European Commission's own impact assessment notes that EPAs could lead to the collapse of the manufacturing sector in some African countries.
The issues that developing countries worked hard to get rid of at the WTO are the same bottlenecks EU is pushing for. ACP countries face further constraints on policy-making while European corporations gain new powers. The experience with bilateral investment treaties between ACP and European countries shows that investment agreements do not by themselves attract foreign capital; what matters are infrastructure, market size and human capital.
The Cotonou Agreement intended that EPAs contribute to regional integration. However, regional integration projects are being undermined where the poorest countries are put in a no-win situation. They either maintain their non-reciprocal access to the European market under the 'Everything but Arms Programme' but leave their regional grouping, or stick with their regional partners and open their market to the EU.
The EPA negotiations appear unwelcoming for ACP countries and a number of civil society groups are calling for EU member states to take action to create fair play for developing countries. The government should look into Uganda's performance as an economy and determine if we can stand the heat. Give-and-take mentality must be withdrawn from the EPA negotiating mandate and some issues rejected to have fair play.
*The writer is a student of Makerere University
New Vision
Russia worries Western "propaganda" scares Africa off from trade opportunities
Russia's truck manufacturers say they're ready to do more business in Africa but their country's image problem may be getting in the way.
"I am not sure that Africa pays enough attention to Russia," says Professor Vladimir Shubin, deputy director of the Moscow-based Russian Academy of Sciences' Institute for African Studies. "I think a good reason for that is the influence of Western propaganda based on events in Russia linked to Chechnya and the mafia, doing its best to portray Moscow as the backyard of Europe. That makes the situation scary for African businesses," Shubin told IPS.
Russia's trade relations with countries in Africa are bilateral, rather than regional like the European Union's with the continent. Russia's exports to Africa until now have mainly been heavy-duty trucks and agricultural equipment. The deals worked out directly with an individual country in exchange for tropical products.
Maurice Okoli, a Moscow-based Nigerian, said that opportunities exist for improved trade relationships between the two regions and that Russia should step up cooperation in both the technical and economic spheres.
"African farmers need equipment to substantially improve agricultural output, the mainstay of the economy. Most of our farmers are still using obsolete tools, and that retards overall production," said Okoli. "During the Soviet days, barter as a means of trade was possible because trade was conducted by the state and not individual businessmen," Okoli explained. "Now everything depends on the agreement you reach with your trading partner. Nigeria imports manufactured goods in exchange for raw materials, mainly crude oil, cocoa and some other traditional products that Russia agrees to buy."
"Nigeria has successfully negotiated for the importation of more than 2,000 Russian buses for the police service, along with 250 cargo trucks last year, in exchange for crude oil. It's necessary for other African importers to adopt a similar purchasing policy with their Russian manufacturers," Okoli said.
A source at the Russian Ministry of Trade and Development said automobile makers plan to assemble trucks, tractors, buses, and spare parts as well as establish service centres in Africa.
"There are interesting proposals on organising vehicle assembly plants in Africa - a promising market we are ready to consider," he said.
One such company, Tartarstan-based KAMAZ Inc., last year sealed a deal to supply durable long-haul trucks to Ghana while Gorky Automobile did the same in 2005. "We plan to deliver to Africa a large quantity of trucks this year and open service centres," said Vladimir Samoilov, a spokesman for public-private KAMAZ Inc. "The KAMAZ heavy trucks have been tested in Africa and we expect that with several modifications, our trucks will spur great interest among a number of other countries," he said.
From Angola to Tunisia, KAMAZ has been exporting trucks to more than a dozen African countries since the 1980s with growing potential in other regional markets. "One can say that in almost all African countries there are at least several of our trucks because they are very suitable for their bumpy roads. We are competitive because of our vehicles' durability, reliability and relatively low prices," Samoilov says.
Shubin said Russia's overall business image has rapidly improved on the international stage and that would significantly influence new trade relations with Africa."But African business partners should also acknowledge the noticeably positive changes in Russia as an impetus to make a possible breakthrough in the economic and trade spheres," he said adding, "this would distinctively mark a departure from the Soviet era when focus was particularly on political ideology and African countries only looked for Soviet assistance and development aid."
"I am very skeptical of the very term aid. I believe it can be applied to some emergency situations, like earthquakes or severe drought. In other cases, it is better to speak about fair trade and cooperation in the business sphere," Shubin said.
IPS
Is Africa selling herself for Chinese trade?
by Tina Brewer
When I read the article at the bottom of page one of Business Report (South Africa) dated September 21, "China plans to send jobless to live in Africa", I had to check that it was not April Fools' Day.
The article says: "China is preparing to send more farmers to Africa as rural labourers find it increasingly difficult to find jobs in the nation's urban centres."
It also says: "With the establishment of the (rapid urbanisation) project, several million farmers will have to move."
So Africa is now the dumping ground for people as well as products. One thing Africa has is plenty of unskilled, unemployed people. We don't need any more, especially as Africa itself is rapidly urbanising.
Is this the price our leaders have agreed to in return for the so-called "no strings attached" Chinese investment, financial aid, etc?
IOL
When I read the article at the bottom of page one of Business Report (South Africa) dated September 21, "China plans to send jobless to live in Africa", I had to check that it was not April Fools' Day.
The article says: "China is preparing to send more farmers to Africa as rural labourers find it increasingly difficult to find jobs in the nation's urban centres."
It also says: "With the establishment of the (rapid urbanisation) project, several million farmers will have to move."
So Africa is now the dumping ground for people as well as products. One thing Africa has is plenty of unskilled, unemployed people. We don't need any more, especially as Africa itself is rapidly urbanising.
Is this the price our leaders have agreed to in return for the so-called "no strings attached" Chinese investment, financial aid, etc?
IOL
Africans divided on EPAs
Former European colonies in Africa remain divided over the trade pacts due to replace their preferential tariffs with the European Union which expire next year, a key negotiator has said.
Countries in the East and Southern Africa (ESA) grouping have not yet been able to reach a consensus on their counter-proposals to the European Commission," Mauritian Agriculture Minister Arvin Boolell said.
The ESA grouping includes 16 countries out of the 78 ACP nations seeking new trade pacts with the EU.
The historical trade arrangements between Europe and its former colonies in the ACP was deemed illegal by the World Trade Agreement.
"The sticking point is the differences between the least developed countries (LDC) and the middle income countries (MIC)," said Mauritian Foreign Minister Murlidass Dulloo.
"Twelve of the 16 countries (in ESA) are LDCs. These countries have duty- and quota-free access to the European market. Therefore, they are in no hurry to make proposals to the European Union and are leaving four middle income countries (Kenya, Zimbabwe, Seychelles and Mauritius) do all the work."
The foreign minister was tasked by his government to conduct consultations towards a common position with the Comoros, Madagascar and the Seychelles.
Africasia
Gambia on growth path
Gambia's economy is expected to grow around 7 percent in 2007, boosted by a rise in agricultural production and an expanding services sector, the West African country's central bank has said.
Banking, tourism and telecoms as well as a booming construction industry were expected to underpin growth this year, acting central bank governor Bamba Saho said in a statement.
"The robust economic expansion is expected to be sustained in the near term supported by improving financial conditions," the statement said. "Inflation is forecast to decelerate to less than 5.0 percent by end December 2007," it said.
Gambia's economy grew an estimated 7.1 percent in 2006, compared with 6.9 percent in 2005, according to central bank figures.
Gambia, a tiny finger of land largely surrounded by neighbouring Senegal and popular with European package tourists, has no significant mineral resources, poorly-developed infrastructure and high levels of illiteracy.
More than 70 percent of its 1.5 million people rely on agriculture to make a living, while around 10 percent are estimated to be dependent on tourism. The vast majority survive on less than $2 a day, according to U.N. figures.
Gambia News
********
Gambia, mainland Africa's smallest country, is expected to clinch a big debt relief package by the end of 2007 but will remain at "high risk of debt distress", the International Monetary Fund said.
Gambia is one of the world's poorest countries and many of its 1.7 million people depend on fishing, tourism, or growing peanuts. But an IMF review recently published painted a picture of a stable and expanding economy expected to grow at seven percent in 2007, up from an average 6.2 percent over the previous three years, with inflation contained at around five percent this year.
Gambia's dalasi currency has appreciated around 20 percent against the dollar in just over three months, which an IMF official said reflected investor confidence.
The Central Bank of The Gambia raised its benchmark rediscount rate by one percentage point to 15 percent in late June to cool down rising inflation, but the IMF said "a favourable outlook for inflation suggests that there may be no need for further tightening in the second half of the year".
Gambia News
Gambia becoming a hot international real estate market
Property company Homesgofast.com believes the tiny West African state of Gambia could be the next hot destination for ambitious investors. The online property portal is offering off-plan investment opportunities on the sun-drenched Gambian coast, and is recruiting agents to promote the country ahead of an expected rush of interest in this emerging market.
The former British colony is the smallest country in mainland Africa, with an area of just 4391 square miles, and a population of 1.5million. Bordered by Senegal to the north, south and east, Gambia is well-established as a popular destination for British tourists, and with winter temperatures of 30˚C it rejoices in its nickname of 'The Smiling Coast'.
It has also been dubbed 'The New Caribbean', and investor confidence has grown rapidly, with property prices rising by 30% a year for the last two years.
Nicholas Marr, chief executive of Homesgofast.com, says: "When you look at all the facts and figures for this region, along with the government's desire to encourage direct inward investment, it appears that Gambia has all the hallmarks of an exciting, emerging market for overseas property investors."
Its rain forests and other habitats are home to more than 500 spectacular species of bird, plus a wide range of other flora and fauna. The country boasts 48km of unspoilt coastline, and around 480km of navigable river.
Gambia has a deserved reputation as a secure destination. Buying property is relatively straightforward, with property conveyancing and laws based on the British legal system.
It also benefits from low inflation, financial stability, and one of the lowest crime rates in the world.
Gambia Now
September 22, 2007
African countries reduced to 'begging' in EPA negotiations
African nations have been reduced to "begging" in negotiations on their future economic ties with the European Union (EU), in what has turned into an exercise "assaulting democracy," according to trade unionists and policy analysts from both north and south.
Timothy Kondo, from the trade union umbrella group Alternatives to Neoliberalism in Southern Africa (ANSA), said that the Commission has not been taking the concerns of poor countries seriously in the talks. Instead, it has concentrated on reducing obstacles faced by western firms wishing to do business abroad.
"The attitude of the EU has to change," Kondo said. "Our governments in Africa have not been negotiating in the proper sense of the word. They have not been involved in what we trade unionists call collective bargaining. They have been involved in collective begging. That is not to blame them. You shouldn't blame the weak. The level of development between Europe and Africa is not the same. But the focus of the EPAs has been on removing barriers to trade between partners that are not equal," Kondo continued.
He complained that suggestions put forward by ACP governments during the talks have been rejected by EU officials.
ACP countries have long argued, for example, that the talks should not cover such topics as competition, investment and government procurement. Yet the draft EPAs prepared by the Commission in the past few months have contained provisions on these issues, which primarily relate to the access that foreign firms would have to ACP markets.
Marc Maes, a trade campaigner with the Belgian anti-poverty group 11.11.11, said that most of the six ACP regional configurations with which the EU has been negotiating have refused to accept the Commission's drafts. "West Africa has been very explicit on that," he noted.
Nonetheless, the Commission has decided to keep its proposals on the table. The Commission has threatened to impose punitive tariffs on ACP exports bound for Europe if their governments do not sign EPAs by Dec. 31.
Earlier this month, the European commissioner for trade Peter Mandelson told members of the European Parliament (MEPs) that he would not consider offering more preferential treatment to ACP countries than the EU's general system of tariffs if the Dec. 31 deadline cannot be met.
London Green MEP Caroline Lucas said that she had become accustomed to Mandelson's "very blunt manner" from his involvement in British politics during his time the closest confidant to former UK Prime Minister Tony Blair. "But even I was shocked by the aggressive and bullying tone he adopted (in ruling out alternatives to the EPAs)," she said.
Addressing the European Parliament's international trade committee on Sep. 11, Mandelson said it was "irresponsible" for anti-poverty activists to claim that tariffs would not have to be imposed on ACP countries if they do not sign the EPAs by the end of this year. Mandelson maintained he has "no legal option" other than imposing tariffs in such an eventuality under rules set by the World Trade Organisation. A waiver to WTO rules applying to current EU-ACP trading arrangements will expire on Jan. 1 2008.
Mamadou Cissokho, president of the Network of Peasant Organisations and Producers in West Africa (ROPPA), said that ACP governments "are not negotiating, they are simply reacting to proposals put to us by Europe. European Union documents have been taken as the basis of our negotiations," he said. "And all of the negotiation meetings have been funded by the EU."
He pointed out that the EU spends $130 billion per year on agricultural subsidies, even though farmers comprise just 4 percent of the Union's population. Despite the huge competitive advantage enjoyed by European farmers, the Commission has urged ACP governments to reduce, and in many cases eliminate, the tariffs they apply to food imports from Europe.
Such trade liberalisation will have profound implications for small-scale African farmers and "jeopardise" the continent's ability to feed itself, according to Cissokho. "Opening up markets willy-nilly means the traditional production methods we have in Africa are not going to be guaranteed or maintained," he said.
Italian MEP Vittorio Agnoletto said that the Commission is trying to "claim that David and Goliath are equal" in the EPA talks. "Frankly, this is a farce," he added. "In this case Goliath - that is, the EU - is playing a false hand because it is not removing agricultural subsidies aimed at its exports."
Agnoletto voiced concerns, too, over how the Commission has suggested that the EPAs commit the ACP side to a robust protection of intellectual property rights. By doing so, he contended, countries would be impeded from circumventing patents on drugs by importing cheap generic versions of treatments for AIDS and other major diseases. Some 30 million people in Africa are HIV positive.
Alexandra Strickner, from the Institute for Agriculture and Trade Policy (AITP) in Austria, argues that there had been a lack of debate in both Europe and in developing countries about the likely implications of the EPAs. It is particularly vital, she said, that parliaments should be given a formal role in scrutinising the accords.
"Mandelson is saying he would like to have the EPAs implemented immediately, without any ratification process in the ACP or in Europe," she explained. "This is an incredible assault on democracy."
IPS
Timothy Kondo, from the trade union umbrella group Alternatives to Neoliberalism in Southern Africa (ANSA), said that the Commission has not been taking the concerns of poor countries seriously in the talks. Instead, it has concentrated on reducing obstacles faced by western firms wishing to do business abroad.
"The attitude of the EU has to change," Kondo said. "Our governments in Africa have not been negotiating in the proper sense of the word. They have not been involved in what we trade unionists call collective bargaining. They have been involved in collective begging. That is not to blame them. You shouldn't blame the weak. The level of development between Europe and Africa is not the same. But the focus of the EPAs has been on removing barriers to trade between partners that are not equal," Kondo continued.
He complained that suggestions put forward by ACP governments during the talks have been rejected by EU officials.
ACP countries have long argued, for example, that the talks should not cover such topics as competition, investment and government procurement. Yet the draft EPAs prepared by the Commission in the past few months have contained provisions on these issues, which primarily relate to the access that foreign firms would have to ACP markets.
Marc Maes, a trade campaigner with the Belgian anti-poverty group 11.11.11, said that most of the six ACP regional configurations with which the EU has been negotiating have refused to accept the Commission's drafts. "West Africa has been very explicit on that," he noted.
Nonetheless, the Commission has decided to keep its proposals on the table. The Commission has threatened to impose punitive tariffs on ACP exports bound for Europe if their governments do not sign EPAs by Dec. 31.
Earlier this month, the European commissioner for trade Peter Mandelson told members of the European Parliament (MEPs) that he would not consider offering more preferential treatment to ACP countries than the EU's general system of tariffs if the Dec. 31 deadline cannot be met.
London Green MEP Caroline Lucas said that she had become accustomed to Mandelson's "very blunt manner" from his involvement in British politics during his time the closest confidant to former UK Prime Minister Tony Blair. "But even I was shocked by the aggressive and bullying tone he adopted (in ruling out alternatives to the EPAs)," she said.
Addressing the European Parliament's international trade committee on Sep. 11, Mandelson said it was "irresponsible" for anti-poverty activists to claim that tariffs would not have to be imposed on ACP countries if they do not sign the EPAs by the end of this year. Mandelson maintained he has "no legal option" other than imposing tariffs in such an eventuality under rules set by the World Trade Organisation. A waiver to WTO rules applying to current EU-ACP trading arrangements will expire on Jan. 1 2008.
Mamadou Cissokho, president of the Network of Peasant Organisations and Producers in West Africa (ROPPA), said that ACP governments "are not negotiating, they are simply reacting to proposals put to us by Europe. European Union documents have been taken as the basis of our negotiations," he said. "And all of the negotiation meetings have been funded by the EU."
He pointed out that the EU spends $130 billion per year on agricultural subsidies, even though farmers comprise just 4 percent of the Union's population. Despite the huge competitive advantage enjoyed by European farmers, the Commission has urged ACP governments to reduce, and in many cases eliminate, the tariffs they apply to food imports from Europe.
Such trade liberalisation will have profound implications for small-scale African farmers and "jeopardise" the continent's ability to feed itself, according to Cissokho. "Opening up markets willy-nilly means the traditional production methods we have in Africa are not going to be guaranteed or maintained," he said.
Italian MEP Vittorio Agnoletto said that the Commission is trying to "claim that David and Goliath are equal" in the EPA talks. "Frankly, this is a farce," he added. "In this case Goliath - that is, the EU - is playing a false hand because it is not removing agricultural subsidies aimed at its exports."
Agnoletto voiced concerns, too, over how the Commission has suggested that the EPAs commit the ACP side to a robust protection of intellectual property rights. By doing so, he contended, countries would be impeded from circumventing patents on drugs by importing cheap generic versions of treatments for AIDS and other major diseases. Some 30 million people in Africa are HIV positive.
Alexandra Strickner, from the Institute for Agriculture and Trade Policy (AITP) in Austria, argues that there had been a lack of debate in both Europe and in developing countries about the likely implications of the EPAs. It is particularly vital, she said, that parliaments should be given a formal role in scrutinising the accords.
"Mandelson is saying he would like to have the EPAs implemented immediately, without any ratification process in the ACP or in Europe," she explained. "This is an incredible assault on democracy."
IPS
Can free trade really save Africa?
by Ndinawe Byekwaso
In The New Vision of September 7, Alec Van Gelde argues that protectionism is condemning poor Tanzanians to high drug prices, while rewarding the owners of the protected infant drug industries. He asserts that protected infant industries never grow to become competitive and exportation is unlikely to occur as neighbouring countries also protect their infant industries.
He also criticises the Nigerian government for banning the importation of wheat, corn, rice and vegetable oil to promote self-sufficiency, when 11 million of its citizens are malnourished. He asserts, "Logic and history show that countries and individuals get richer by specialisation in things they do best."
Logically, competition can occur only among equals. Can a six-year-old compete against an 18-year-old in a race? Whenever infant industries are exposed to mature industries, they are destroyed. Local industries and agricultural enterprises only become competitive if they make profits for a period long enough to enable them to carry out research for innovation and employ better qualified personnel. Can infant industries make profits when they are out-competed under liberalisation?
There is evidence to show that no country has ever developed on the practices of free trade, nor do the developed countries practise free trade today. For example, as early as 1813, to protect British textiles from Indian cotton and silk goods that were 50% to 60% cheaper than the British goods, they were subjected to an import duty of 70% to 80%.
Britain first developed her industrial base to become the workshop of the world and then later preached free trade, which was rejected by the US as British economic imperialism. Later, Italy, Germany and France followed suit in denouncing free trade. Japan developed her industrial economy under protective tariffs. The US, which practised protectionism and isolationism for more than 100 years, only started preaching free trade after the second World War.
Even today, developed countries are preaching free trade abroad, but practising protectionism at home.
While millions of smallholder farmers in the third world have to survive on less than $400 a year in total income, they are competing against American and European farmers who receive an average of $21,000 and $16,000 a year in subsidies, respectively. Consequently, the US and the EU account for around half of all wheat exports, at prices which are 46% and 34% below costs of production.
The US accounts for more than half of all maize exports at prices one-fifth below the costs of production, while the EU is the world's largest exporter of skimmed-milk, at prices one half of the costs of production. The EU is the world's largest exporter of white sugar, at only one quarter of production costs.
So why criticise Nigeria for banning the importation of wheat, rice, corn and oil?
If the local industries do not come up, or are wiped out by foreign competition and agriculture sectors are destroyed by subsidised foreign food imports from developed countries, where will the poor Africans earn incomes to afford cheap imported drugs and foods?
New Vision-Uganda
In The New Vision of September 7, Alec Van Gelde argues that protectionism is condemning poor Tanzanians to high drug prices, while rewarding the owners of the protected infant drug industries. He asserts that protected infant industries never grow to become competitive and exportation is unlikely to occur as neighbouring countries also protect their infant industries.
He also criticises the Nigerian government for banning the importation of wheat, corn, rice and vegetable oil to promote self-sufficiency, when 11 million of its citizens are malnourished. He asserts, "Logic and history show that countries and individuals get richer by specialisation in things they do best."
Logically, competition can occur only among equals. Can a six-year-old compete against an 18-year-old in a race? Whenever infant industries are exposed to mature industries, they are destroyed. Local industries and agricultural enterprises only become competitive if they make profits for a period long enough to enable them to carry out research for innovation and employ better qualified personnel. Can infant industries make profits when they are out-competed under liberalisation?
There is evidence to show that no country has ever developed on the practices of free trade, nor do the developed countries practise free trade today. For example, as early as 1813, to protect British textiles from Indian cotton and silk goods that were 50% to 60% cheaper than the British goods, they were subjected to an import duty of 70% to 80%.
Britain first developed her industrial base to become the workshop of the world and then later preached free trade, which was rejected by the US as British economic imperialism. Later, Italy, Germany and France followed suit in denouncing free trade. Japan developed her industrial economy under protective tariffs. The US, which practised protectionism and isolationism for more than 100 years, only started preaching free trade after the second World War.
Even today, developed countries are preaching free trade abroad, but practising protectionism at home.
While millions of smallholder farmers in the third world have to survive on less than $400 a year in total income, they are competing against American and European farmers who receive an average of $21,000 and $16,000 a year in subsidies, respectively. Consequently, the US and the EU account for around half of all wheat exports, at prices which are 46% and 34% below costs of production.
The US accounts for more than half of all maize exports at prices one-fifth below the costs of production, while the EU is the world's largest exporter of skimmed-milk, at prices one half of the costs of production. The EU is the world's largest exporter of white sugar, at only one quarter of production costs.
So why criticise Nigeria for banning the importation of wheat, rice, corn and oil?
If the local industries do not come up, or are wiped out by foreign competition and agriculture sectors are destroyed by subsidised foreign food imports from developed countries, where will the poor Africans earn incomes to afford cheap imported drugs and foods?
New Vision-Uganda
East African trade stakeholders insist on product exceptions in EPAs
Government leaders and exporters in east Africa are adamant that certain products be excluded from the economic partnership agreements (EPAs) to prevent detrimental effects on the livelihoods of the majority of people in the region.
The WTO granted the EU a special exemption that allows it to continue giving ACP exporters preferential access to its markets until December 2007. But what will happen to products essential to livelihoods or vulnerable to foreign competition when the deadline has expired?This is especially of concern, given the hefty subsidies that European farmers receive while east African producers toil without government support. European products are therefore artificially cheap, and can be dumped on African markets while east African products are too costly to export.
"We have ended up with imports from other countries that are much cheaper, pushing out similar Kenyan produced items," trade and industry permanent secretary David Nalo said at a workshop in Nairobi last month.
As an example, he referred to powdered milk from Europe which the government blocked in the early 1990s by hiking tariffs to protect its dairy industry, which now indirectly supports three million people. "If we allowed the powdered milk to be imported into Kenya, it would have totally destroyed the industry."
Products regarded as sensitive are especially those from the agricultural and manufacturing sectors. The domestic market remains a critical outlet for Kenya's mostly impoverished small-scale farmers. They are not able to compete against imported products or in export markets.
One of the reasons is poor infrastructure; particularly roads, communication, irrigation and technology development. Moreover, "technical barriers like stringent requirements in fish production makes exporting fish out of reach for our farmers", said Miriam Omolo, trade programme officer at the Institute of Economic Affairs, an NGO.
Nalo insisted that "we have a defensive interest to protect our farming from being destroyed. It could be the source of agro industrialization. We do not want it to be eroded."He also said that the sensitivity of agriculture necessitates a transitional period of 25 years to ease east African states into reciprocity with the mighty EU. "We do not want to be talking about agro industries on the one hand, and then we are opening too much and we destroy local industry."
EU trade commissioner Peter Mandelson also had mentioned transitional periods of "up to 25 years" earlier this year.
Secretary general of the Common Market of Eastern and Southern Africa (COMESA), Erastus Mwencha, has said that COMESA states are seeking a period of 25 years to phase in liberalisation under the EPA. However, 25 years may still not be long enough, he told the press last month.
Compiling the regional list of sensitive products has been a complicated process, he said. A "very exhaustive inventory" of products had to be drawn up.
Kenya's list of sensitive products includes mostly agricultural products, such as sugar, coffee, tea, wheat, meat, fisheries, poultry, dairy products, potato starch and soya beans. Processed foods on the list include dried fruit, roasted coffee, sausages, flour and fruit juices. Other products include woven fabrics, clothing, tableware and kitchenware, cigarettes, paints, tubes, boxes, hides and skins and cotton yarn products.
They were selected using criteria such as vulnerability to imports; employment of large numbers of people, especially low-income earners; rural development; and Kenya's production capacity. The central criterion was food security-whether the commodity is part of the basic Kenyan food basket.
The Kenya Institute of Public Policy Research and Analysis (Kippra) has stated that unforeseen import surges can affect food security, livelihoods and rural development. Agriculture is the main employer and contributor to the gross domestic product (GDP) of low-income countries.
Being one of them, Kenya is in a similar situation, as agriculture contributes 16 percent of GDP and employs 75 percent of the workforce.
allafrica.com
South Africa unlikely to yield on EPA third generation issues
South Africa "felt very strongly" about the exclusion of so-called new-generation issues from the negotiations between the European Union (EU) and the Southern African Development Community (SADC) over an economic partnership agreement, Trade and Industry Deputy Minister Rob Davies has said.
SA is unlikely to budge on this issue, despite EU Trade Commissioner Peter Mandelson suggesting recently that SA was acting as a stumbling block to the successful finalisation of the talks. Mandelson said SA's "deeply negative" stance was holding up the crucial trade talks.
However, Davies insisted SA was not out to wreck the negotiations. It wanted to conclude the process by the December deadline and believed this could be done if there was a "realistic agenda limited to the trade in goods." The "strong stand" was warranted by the issues at stake.
Davies said: "It is a bridge too far to insist that there be upfront commitments on any of the new-generation issues such as competition and investment protection agreements.It is not a contribution to regional integration. We know very well that the EU has identified these kinds of issues as part of their offensive interests to make market access for European companies real."
Davies said he did not accept that the new-generation issues were on the agenda because of some desire by the EU to create a region in southern Africa which was attractive to foreign investors. "I think this is part of the game of seeking concessions by one-sided negotiations."
A "trade in goods deal" would not be a pushover for either side, but would require bargaining. If concluded, it would improve SA's access to the European market - access which SA would have to pay for by offering some improved access to the EU into the region. "Why should we have to pay further by making commitments on the new-generation issues?" Davies said. "This will make it much more difficult to achieve regional integration later, as we will then have a binding set of agreements with the EU ahead of any commitments we might make among ourselves as SADC."
Davies said if the negotiations were not concluded by the end of December, there would be nothing to replace the Cotonou trade agreement between the EU and the ACP countries, which terminates at year end.
The less favourable General System of Preferences (GSP) trading regime would then kick in.
Alarm as East African states move slowly on EU trade talks
The East African community partners might not sign a trade deal with the European Union (EU) after sharp differences emerged during a technical experts meeting in Arusha last week. The meeting, attended by permanent secretaries from trade related ministries, failed to agree on a consensus text agreed during the Heads of State extraordinary meeting early last month.
"We are concerned over the slow pace in arriving at a common position towards implementing the decision to negotiate an EAC-EPA with the European Union," Mr. Arun Devani, the chairman of the Arusha based East African Business Council, said in a statement.
However, the Permanent Secretary ministry of Trade and Industry, Mr. David Nalo, said that it is important that the EPAs agreement are concluded by the deadline of December 31 this year.
"The EU has been one of the leading markets for Kenya’s export products. The value of exports to EU rose from Sh66.9 billion in 2005 to Sh71.4billion in 2006, a growth by 4.7per cent," he said
"ESA member states are committed to signing the EPA by December 31. However, we are at different stages of completing the mandated preparatory work. The negotiating team requires your guidelines in the event that the EPA is not signed by deadline," Nalo told stakeholders in the EPA negotiations committee.
Devani said, "We have less than 90 days to the conclusion of the negotiations with EU. If we do not move fast, the business community may be dealt a great blow when the current preferential trading regime expires on December 31. If the EAC Partner States fail to meet the negotiations deadline, we may face the consequences of trading with the EU in competition on equal terms, with all other developing countries under the Generalised System of Preferences scheme, which is consistent with the international rules of trade," he added.
He said the situation creates uncertainty amongst the wider business community of EAC.
The Standard
"We are concerned over the slow pace in arriving at a common position towards implementing the decision to negotiate an EAC-EPA with the European Union," Mr. Arun Devani, the chairman of the Arusha based East African Business Council, said in a statement.
However, the Permanent Secretary ministry of Trade and Industry, Mr. David Nalo, said that it is important that the EPAs agreement are concluded by the deadline of December 31 this year.
"The EU has been one of the leading markets for Kenya’s export products. The value of exports to EU rose from Sh66.9 billion in 2005 to Sh71.4billion in 2006, a growth by 4.7per cent," he said
"ESA member states are committed to signing the EPA by December 31. However, we are at different stages of completing the mandated preparatory work. The negotiating team requires your guidelines in the event that the EPA is not signed by deadline," Nalo told stakeholders in the EPA negotiations committee.
Devani said, "We have less than 90 days to the conclusion of the negotiations with EU. If we do not move fast, the business community may be dealt a great blow when the current preferential trading regime expires on December 31. If the EAC Partner States fail to meet the negotiations deadline, we may face the consequences of trading with the EU in competition on equal terms, with all other developing countries under the Generalised System of Preferences scheme, which is consistent with the international rules of trade," he added.
He said the situation creates uncertainty amongst the wider business community of EAC.
The Standard
South African negotiator confident southern Africa will meet EPA deadline
South Africa's chief trade negotiator, Xavier Carim, is quietly confident that the southern African trade bloc can finalise an economic partnership agreement with the European Union (EU) before the Cotonou agreement expires. He, however, is firm that southern Africa will not relent and make binding commitments on new-generation issues.
EU Trade Commissioner Peter Mandelson talked tough in Brussels last week on the looming deadline, singling out SA's stance as "deeply negative".The parties are currently meeting. Speaking from Brussels, Carim said the parties had made good progress on trading goods, and were thrashing out details on increased market access .
There was a push to increase access to the EU for agricultural goods and some processed products, while SA was ready to increase access to EU fish products, and certain industrial and agri-processed products, in line with SA's industrial policy . The tariff concessions had been widely canvassed with the Southern African Customs Union (Sacu) and the National Economic Development and Labour Council (Nedlac), Carim said.
The parties were, however, still deadlocked on new-generation issues. These include trade-related matters such as government procurement, and competition. Carim argued that the region could not make binding commitments on these complex issues in the limited time left.
"The key issue is that they want us to commit now, but we should be very careful. Let us get capacity in place first."
Mandelson, in his assessment of the negotiations to the European Parliament's international trade committee, accused SA of "preventing others, much less well off than them in the region, from moving forward."
But a trade economist said SA's stance appeared to have softened in recent months. "SA has certainly adopted a more developmental-friendly approach, notably to rules of origin. I am cautiously optimistic about the talks as finally there appears to be some constructive engagement ," said Eckart Naumann of the Trade Law Centre for Southern Africa (Tralac) .
Naumann noted that while SA might be blamed by the Europeans for the apparent lack of progress, " SA's wider range of offensive and defensive interests compared to other countries, together with its relatively greater negotiating capacity, will naturally translate into tougher and at times slower negotiations."
But this should not be an excuse to stall the process, especially as "some of SA's SACU partners have relatively more to lose."
If the economic partnership agreement is not concluded before a waiver on the Cotonou agreement -- which does not comply with World Trade Organisation rules -- expires at year-end, Botswana, Namibia and Swaziland's trade with the EU would be governed by the much more onerous General System of Preferences.
A trade commentator recently warned that the implications for these countries were severe, as they stood to lose export contracts. " Once supply contracts are lost there is no guarantee that you will get them back ," said Trudi Hartzenberg, executive director of Tralac .
Carim, however, said the parties were "pretty close" and there was a "gradual realisation in the EU that forcing these issues is not the right way to go."
Business Day- South Africa
African countries fear revenue losses from tariff reductions
Mr. Buba Gyang, Comptroller General of the Nigeria Customs Service (NCS), a said most African countries are reluctant to drop duties on imports, because "the duties provide a large part of their annual revenue."
Gyang said some African countries depend on the duties for more than 60 per cent of their annual revenue. "If you look at the issue of collapsing trade barriers from one point, you will realise that the customs duty is a barrier, but how many African countries will be willing to part with the duties ?," he asked.
He said Nigeria, which has one of the largest economies on the continent, generates about N400 billion ($3 billion) from customs duties and other taxes, making it the second largest earner after petroleum.
Gyang said a country like Ghana depends on the duties for about 50 per cent of its total revenue, while the other West African countries wait on the duties to augment their budgets as well. "That is why African countries are asking the European Union, which brought in the idea of the Economic Partnership Agreement (EPA), to spell out alternatives," he said.
The EPA is a proposal by the EU to African, Caribbean and Asian countries to agree on liberalising their borders by the end of the year.
Gyang said the alternatives or development packages to supplement the revenue loss at the borders and ports had not been clearly spelt out by the EU, making many African countries reluctant to sign the EPA. He said the ECOWAS Trade Liberalisation Scheme (ETLS) had achieved some level of success in promoting regional trade, because a compensation mechanism was worked out for countries that removed their duties. "A 0.5 per cent levy is charged on imports from third countries, or countries outside the ECOWAS region, and are set aside to compensate countries that drop their duties in the ETLS," Gyang said.
Buba, who was in Accra to discuss with stakeholders from five West African countries on the challenges of trade on the Abidjan-Lagos corridor, said that complianceto the ETLS tenets and the International Transit Code would reduce the distractions on the 122, 000 route.
This Day
AfDB contributes to effort to improve African investment climate
In a bid to improve the African business environment, the African Development Bank (AfDB) has approved a grant of US$ 15 million from its surplus account in support of the Investment Climate Facility (ICF).
The ICF is a new Public-Private Initiative through which donors, international and domestic corporations and NGOs, will collaborate with African governments and regional organizations, to improve the investment climate at the national, regional, and continental levels. The Facility was incorporated in Tanzania, in April and will work with other players in the field of investment climate enhancement. It will identify opportunities to develop programs that address important constraints on business on the continent.
The Facility will support the design and implementation of programs in eight areas that have been agreed on as priority constraints to the enabling environment. These are property rights, taxation and customs; infrastructure facilitation, competition, business registration and red tape, financial markets, labor markets, corruption and crime.
ICF activities fall under six broad areas – legislative review and reforms; capacity building of key institutions such as land registry offices, company registries and commercial courts; promotion of public-private sector dialogue; implementation of recommendations of the NEPAD APRM (African Peer Review Mechanism) process; research as well as economic and sector work in the priority areas; and media work aiming at improving Africa’s image as a place to do business.
The ICF’s business plan calls for processing about 12 new projects each year. The size of projects will vary from less than US$ 500,000, which can be approved by the CEO, to over US$ 1 million, which requires the approval of the BOT. The ICF will target projects that fill specific gaps in the programs offered by other development partners and will generally seek larger projects to gain economies of scale.
The initial phase of the ICF’s operations will be driven by three strategic themes: Intra-African trade – improving Africa’s import and export environment as well as improving and simplifying administration in order to facilitate cross-border trade; Facilitating business development and expansion, focusing on constraints on ICT and infrastructure development, business registration and licensing, and property rights; and, Facilitating financial and investment environment, developing capital markets, increasing access to finance for enterprises, improving the regulatory environment for second and third tier institutions and facilitating improved digital infrastructure.
At the invitation of the Facility, the Bank will play two key roles as its primary regional partner, core financial contributor and resource administrator.
The ICF’s projected funding needs stand at US$ 550 million during its life-span (7 years) with an initial target funding level of US$ 120 million for the first three years of operation. The US$ 15 million grant will be approved by the Board of Governors of the Bank Group.
Accra Daily Mail
Norway cancels Gambia's debt
The Norwegian Government agreed today to cancel NOK 2.5 million ($450,000) of The Gambia’s debt to Norway.
The agreement is based on a multilateral framework agreement concluded in the Paris Club, a forum for creditor countries, in June this year. The debt treatment for The Gambia in the Paris Club is part of the international initiative to reduce the debts of the poorest and most debt-stricken countries (the Heavily Indebted Poor Countries, or HIPC, initiative).
In accordance with the Norwegian Debt Relief Strategy, the debt was cancelled without taking any funds from the development budget. The cancellation does not therefore affect the development assistance provided to other poor countries.
The Gambia’s remaining NOK 7 million ($1.2 million) of debt to Norway will be cancelled when the country reaches the completion point defined under the HIPC initiative.
Gambia News
World Bank committs record $5.7 billion to Africa
The World Bank Group committed a record $5.7 billion in International Development Association (IDA) resources to Sub-Saharan Africa in the last fiscal year, one billion dollar more than in the previous year.
In addition, the International Finance Corporation (IFC), the Bank Group's private sector arm, provided $1.38 billion in financing for its own account and mobilized an additional $261 million in financing through syndications, the bank said.
Africa, the bank's lead development priority, is in its third year of economic growth at levels above five percent, despite persistent constraints throughout the region arising from inadequate infrastructure, low investment and limited skills. Higher economic growth is lowering poverty levels. However, although there is significant variation among countries, and many countries are showing measurable progress in expanding the reach of education and attacking malaria and HIV/AIDS, most African countries aren't yet on track to achieve the Millennium Development Goals by 2015, the WB said.
"We are now seeing increases in African countries per capita income consistent with those of other developing countries, and African countries have made great strides in expanding access to health and education," said Obiageli Ezekwesili, Vice President for Africa. "African leaders are well aware of the support that IDA provides and this is why they are strong supporters of a robust replenishment of IDA this year."
A significant factor in the bank's increased commitment is an expanding investment in infrastructure - particularly electricity generation-badly needed to sustain healthy growth in the higher-performing economies, and to raise productivity in slow-growth countries. In fiscal year 2007, which ended June 30, the bank committed $2.4 billion of IDA funds to infrastructure projects, of which $660 million was lending for the energy and mining sectors and $870 million was transport sector lending.
Regional projects-another emerging priority for Africa-accounted for a record $707 million for the year. By helping to integrate Africa's small, fragmented economies, these projects are critical to establishing an enlarged economic space for the region, while providing critical links for economically vulnerable landlocked countries.
IDA provides interest-free loans and grants to the world's poorest countries, of which 39 are in Africa. In fiscal year 2007. Africa accounted for nearly half of all IDA commitments. Other financing instruments were also made available in Africa. The International Bank of Reconstruction and Development (IBRD), which charges market-based interest rates to borrowers, approved $37.5 million in loans to African countries showing higher income levels. The Global Environment Facility committed $52.7 million in Africa, and $159.6 million was provided by bank-managed trust funds supporting Sudan's rehabilitation.
The newly created Africa Catalytic Growth Fund agreed to support five projects with projected disbursements of $148 million. The fund addresses specific constraints that may be holding a country back or blocking progress on the Millennium Development Goals.
Beyond direct financial support, the bank provided clients 104 pieces of analytical work during the year, along with 90 technical assistance projects.
As part of a private sector push in Africa, IFC stepped up its activities. Among other things, it helped increase cellular access in the Democratic Republic of Congo (DRC), Madagascar, Malawi, Sierra Leone, and Uganda by mobilizing loans from international commercial banks to rebuild communications infrastructure.
Lars Thunell, IFC Executive Vice President and CEO, said, "Last year we doubled our finical commitments to the private sector in sub-Saharan Africa, which continues to be a priority frontier region for IFC. We helped 166,000 small African businesses get access to finance last year. Our projects gave six million new customers access to power and created 11 million new telephone communications across the region."
In addition, the International Finance Corporation (IFC), the Bank Group's private sector arm, provided $1.38 billion in financing for its own account and mobilized an additional $261 million in financing through syndications, the bank said.
Africa, the bank's lead development priority, is in its third year of economic growth at levels above five percent, despite persistent constraints throughout the region arising from inadequate infrastructure, low investment and limited skills. Higher economic growth is lowering poverty levels. However, although there is significant variation among countries, and many countries are showing measurable progress in expanding the reach of education and attacking malaria and HIV/AIDS, most African countries aren't yet on track to achieve the Millennium Development Goals by 2015, the WB said.
"We are now seeing increases in African countries per capita income consistent with those of other developing countries, and African countries have made great strides in expanding access to health and education," said Obiageli Ezekwesili, Vice President for Africa. "African leaders are well aware of the support that IDA provides and this is why they are strong supporters of a robust replenishment of IDA this year."
A significant factor in the bank's increased commitment is an expanding investment in infrastructure - particularly electricity generation-badly needed to sustain healthy growth in the higher-performing economies, and to raise productivity in slow-growth countries. In fiscal year 2007, which ended June 30, the bank committed $2.4 billion of IDA funds to infrastructure projects, of which $660 million was lending for the energy and mining sectors and $870 million was transport sector lending.
Regional projects-another emerging priority for Africa-accounted for a record $707 million for the year. By helping to integrate Africa's small, fragmented economies, these projects are critical to establishing an enlarged economic space for the region, while providing critical links for economically vulnerable landlocked countries.
IDA provides interest-free loans and grants to the world's poorest countries, of which 39 are in Africa. In fiscal year 2007. Africa accounted for nearly half of all IDA commitments. Other financing instruments were also made available in Africa. The International Bank of Reconstruction and Development (IBRD), which charges market-based interest rates to borrowers, approved $37.5 million in loans to African countries showing higher income levels. The Global Environment Facility committed $52.7 million in Africa, and $159.6 million was provided by bank-managed trust funds supporting Sudan's rehabilitation.
The newly created Africa Catalytic Growth Fund agreed to support five projects with projected disbursements of $148 million. The fund addresses specific constraints that may be holding a country back or blocking progress on the Millennium Development Goals.
Beyond direct financial support, the bank provided clients 104 pieces of analytical work during the year, along with 90 technical assistance projects.
As part of a private sector push in Africa, IFC stepped up its activities. Among other things, it helped increase cellular access in the Democratic Republic of Congo (DRC), Madagascar, Malawi, Sierra Leone, and Uganda by mobilizing loans from international commercial banks to rebuild communications infrastructure.
Lars Thunell, IFC Executive Vice President and CEO, said, "Last year we doubled our finical commitments to the private sector in sub-Saharan Africa, which continues to be a priority frontier region for IFC. We helped 166,000 small African businesses get access to finance last year. Our projects gave six million new customers access to power and created 11 million new telephone communications across the region."
The lessons of South Korea's investment in technology
By Tom Gara
Entrepreneurship and technology are two themes we’ll never get tired of here at Business Today Egypt. On their own, they represent two essential aspects of any nation’s economic progress. Combined, they are probably the most powerful force for wealth creation and socioeconomic progress available today. Think we might be overselling things just a little?
If we’re looking for a model of how to transform the national economy, we could do worse than looking at South Korea
In 1955, South Korea emerged from 40 years of occupation and bitterly fought civil war as one of the poorest countries in Asia. Its GDP purchasing power parity (PPP) per capita in 1963 was a little less than $100, putting it right alongside some of the world’s poorest countries. Its government followed fairly textbook practice for an emerging economy, focusing on the development of export-oriented light industry and manufacturing.
By 1975, its GDP PPP per capita had reached just under $3,700, approximately 2.5 times that of Egypt in the same year. As incomes rose, low-paying work in labor-intensive industries gradually moved abroad, often to neighboring countries in South-East Asia. Workers progressively became better trained, better paid and better educated.
Egypt’s difficult embrace of an Open- Door policy toward private investment during the same period made millionaires of some, but rarely did it create internationally competitive businesses. While South Korean economic planners emphasized labor productivity and managerial efficiency — creating what many analysts believed to be the most productive workforce in the world by the late-1970s — Egypt’s leaders remained moored in delivering the more mundane aspects of statist socialism: feeding and employing a booming, poor population.
The pattern has continued ever since. South Korean industry has continually evolved to embrace, and often invent, new technologies, manufacturing techniques and markets. The country’s rise as a modern industrial and post-industrial power has gone hand in hand with what economists consider to be one of the longest periods of continuous economic growth ever recorded.
As one can see from the graph on the following page, while South Korea has boomed, joining the exclusive OECD in 1996 and the even more exclusive “Trillion Dollar Club” in 2006, Egyptian incomes have largely stagnated. Although a myriad of complex factors are behind the comparative rise of South Korea in relation to a struggling Egypt, the role of entrepreneurs that embrace technology, and the government policy that supports them, cannot be overlooked.
Behind most of the diversified superstar companies of South Korea’s modern economy lie businesses that have continually evolved and diversified over time. Samsung, a $65-billion high tech powerhouse, began its operations in 1969 as a manufacturer of household appliances and is now the world’s largest manufacturer of RAM memory chips and the second-largest semiconductor manufacturer. Its mobile phone business is moving from strength to strength. LG, founded as the Lucky Goldstar group in 1947 and initially known for its household products, now enjoys strong positions in digital display technology, mobile communications and consumer electronics.
The role of government policy in South Korea’s rise cannot be understated. Like Egypt, South Korea has been governed for the last 50 years by a strong central government that focuses on internal stability and friendly international relations, particularly with trade superpowers. The big difference was in the emphasis of this heavily interventionist rule: Egypt’s government spent the 1970s and much of the 1980s grappling with the aftermath of war, the establishment of sustainable peace and the emergence of insurgency. This heavy focus on internal security and international diplomacy came at the cost of industrial advancement and the development of Egypt’s enormous human capital. The initial focus of South Korea’s postwar leadership, by contrast, was on the development of essential infrastructure and education systems, key enablers of modern industrialization.
With the development of the South Korean industrial sector came a government focus on encouraging both exports and foreign investment. Interventionist policies, including heavy import tariffs, export subsidies and the government backing of strategic, high potential industries, succeeded in building an internationally competitive export sector.
As the era of high technology approached, the government refocused its efforts on creating a workforce and industry ready to lead the world in new high-tech industries. The establishment in the mid-1980s of two highly advanced technical universities and research centers reflected government recognition of the importance of industry-focused technical education. Not only did these institutes help attract home top South Korean academics working abroad, it gave local students the opportunity to obtain a world-class technical education, and fueled the growth of the country’s high-tech industries.
With the internet-based knowledge economy approaching, in the late 1990s the South Korean government placed a new emphasis on seeing their country lead the world in internet connectivity. And voila! As of 2006, South Korea enjoys the world’s highest broadband internet penetration rate, with over 80% of households having a DSL connection — more than double the rate of either the United States or United Kingdom.
The latest move? In early August, the government announced that it plans to see a robot in every home by 2020.
The average South Korean now earns in a year what a skilled Egyptian worker might earn in a decade. The combination of world-beating post-industrial businesses, smart government policy and an educated, entrepreneurial workforce is now in effect a self-fulfilling prophecy, as more and more money becomes available to pour into research and development, venture funding and higher education.
South Korea certainly enjoyed a considerable head start over Egypt in the race toward high-technology leadership. While they were establishing world-class research centers and developing advanced industrial businesses such as chemicals and shipbuilding, Egypt was mulling over the prospect of simply privatizing the legions of once-great businesses nationalized over 30 years previously.
None of this means that Egypt must permanently remain stuck 20-30 years behind the leaders. Our country now has an opportunity to enjoy the bounties of South Korean-style economic development, and thanks to changes in both technology and world trade, the 50 years of industrialization and evolution toward a world-class technology sector may no longer be a necessity. As New York Times columnist and best selling author Thomas Friedman has described extensively in his books The Lexus and the Olive Tree and The World is Flat, the combination of globalization and new technology has leveled the playing field for aspiring entrepreneurs.
Knowledge, innovation and entrepreneurship are now globally valued commodities, and can be capitalized on anywhere. Smart people with good ideas and an inextinguishable will to succeed can now serve global markets, almost entirely regardless of their geographical location, nationality or funding.
Luckily, it seems the Egyptian government has at least partially clocked onto this change in the rules of the game. Since the turn of the century, policies that promote the development of an information economy have come hand in hand with a generally pro-growth, neoliberal modernization of the economy.
The country still has a long way to go, both in terms of government policy and private sector innovation. On the government side, recognition of the central importance of technical education and research — a key not only to the rise of South Korea, but to all post-industrial nations — remains little more than a talking point. The private sector must shift focus from the current trend of acting as mere distributors or middlemen for global companies, and begin creating its own intellectual property. As long as the role models for young entrepreneurs remain those who secured distribution or franchise rights for foreign brands, it is unlikely that Egyptian industry will create much knowledge of global value.
Role models for a new type of entrepreneur — one who creates, rather than acquires, valuable knowledge and technology — do exist here. To shine some light on Egypt’s rising breed of rising technopreneurs, ...
Business Today-Egypt
Entrepreneurship and technology are two themes we’ll never get tired of here at Business Today Egypt. On their own, they represent two essential aspects of any nation’s economic progress. Combined, they are probably the most powerful force for wealth creation and socioeconomic progress available today. Think we might be overselling things just a little?
If we’re looking for a model of how to transform the national economy, we could do worse than looking at South Korea
In 1955, South Korea emerged from 40 years of occupation and bitterly fought civil war as one of the poorest countries in Asia. Its GDP purchasing power parity (PPP) per capita in 1963 was a little less than $100, putting it right alongside some of the world’s poorest countries. Its government followed fairly textbook practice for an emerging economy, focusing on the development of export-oriented light industry and manufacturing.
By 1975, its GDP PPP per capita had reached just under $3,700, approximately 2.5 times that of Egypt in the same year. As incomes rose, low-paying work in labor-intensive industries gradually moved abroad, often to neighboring countries in South-East Asia. Workers progressively became better trained, better paid and better educated.
Egypt’s difficult embrace of an Open- Door policy toward private investment during the same period made millionaires of some, but rarely did it create internationally competitive businesses. While South Korean economic planners emphasized labor productivity and managerial efficiency — creating what many analysts believed to be the most productive workforce in the world by the late-1970s — Egypt’s leaders remained moored in delivering the more mundane aspects of statist socialism: feeding and employing a booming, poor population.
The pattern has continued ever since. South Korean industry has continually evolved to embrace, and often invent, new technologies, manufacturing techniques and markets. The country’s rise as a modern industrial and post-industrial power has gone hand in hand with what economists consider to be one of the longest periods of continuous economic growth ever recorded.
As one can see from the graph on the following page, while South Korea has boomed, joining the exclusive OECD in 1996 and the even more exclusive “Trillion Dollar Club” in 2006, Egyptian incomes have largely stagnated. Although a myriad of complex factors are behind the comparative rise of South Korea in relation to a struggling Egypt, the role of entrepreneurs that embrace technology, and the government policy that supports them, cannot be overlooked.
Behind most of the diversified superstar companies of South Korea’s modern economy lie businesses that have continually evolved and diversified over time. Samsung, a $65-billion high tech powerhouse, began its operations in 1969 as a manufacturer of household appliances and is now the world’s largest manufacturer of RAM memory chips and the second-largest semiconductor manufacturer. Its mobile phone business is moving from strength to strength. LG, founded as the Lucky Goldstar group in 1947 and initially known for its household products, now enjoys strong positions in digital display technology, mobile communications and consumer electronics.
The role of government policy in South Korea’s rise cannot be understated. Like Egypt, South Korea has been governed for the last 50 years by a strong central government that focuses on internal stability and friendly international relations, particularly with trade superpowers. The big difference was in the emphasis of this heavily interventionist rule: Egypt’s government spent the 1970s and much of the 1980s grappling with the aftermath of war, the establishment of sustainable peace and the emergence of insurgency. This heavy focus on internal security and international diplomacy came at the cost of industrial advancement and the development of Egypt’s enormous human capital. The initial focus of South Korea’s postwar leadership, by contrast, was on the development of essential infrastructure and education systems, key enablers of modern industrialization.
With the development of the South Korean industrial sector came a government focus on encouraging both exports and foreign investment. Interventionist policies, including heavy import tariffs, export subsidies and the government backing of strategic, high potential industries, succeeded in building an internationally competitive export sector.
As the era of high technology approached, the government refocused its efforts on creating a workforce and industry ready to lead the world in new high-tech industries. The establishment in the mid-1980s of two highly advanced technical universities and research centers reflected government recognition of the importance of industry-focused technical education. Not only did these institutes help attract home top South Korean academics working abroad, it gave local students the opportunity to obtain a world-class technical education, and fueled the growth of the country’s high-tech industries.
With the internet-based knowledge economy approaching, in the late 1990s the South Korean government placed a new emphasis on seeing their country lead the world in internet connectivity. And voila! As of 2006, South Korea enjoys the world’s highest broadband internet penetration rate, with over 80% of households having a DSL connection — more than double the rate of either the United States or United Kingdom.
The latest move? In early August, the government announced that it plans to see a robot in every home by 2020.
The average South Korean now earns in a year what a skilled Egyptian worker might earn in a decade. The combination of world-beating post-industrial businesses, smart government policy and an educated, entrepreneurial workforce is now in effect a self-fulfilling prophecy, as more and more money becomes available to pour into research and development, venture funding and higher education.
South Korea certainly enjoyed a considerable head start over Egypt in the race toward high-technology leadership. While they were establishing world-class research centers and developing advanced industrial businesses such as chemicals and shipbuilding, Egypt was mulling over the prospect of simply privatizing the legions of once-great businesses nationalized over 30 years previously.
None of this means that Egypt must permanently remain stuck 20-30 years behind the leaders. Our country now has an opportunity to enjoy the bounties of South Korean-style economic development, and thanks to changes in both technology and world trade, the 50 years of industrialization and evolution toward a world-class technology sector may no longer be a necessity. As New York Times columnist and best selling author Thomas Friedman has described extensively in his books The Lexus and the Olive Tree and The World is Flat, the combination of globalization and new technology has leveled the playing field for aspiring entrepreneurs.
Knowledge, innovation and entrepreneurship are now globally valued commodities, and can be capitalized on anywhere. Smart people with good ideas and an inextinguishable will to succeed can now serve global markets, almost entirely regardless of their geographical location, nationality or funding.
Luckily, it seems the Egyptian government has at least partially clocked onto this change in the rules of the game. Since the turn of the century, policies that promote the development of an information economy have come hand in hand with a generally pro-growth, neoliberal modernization of the economy.
The country still has a long way to go, both in terms of government policy and private sector innovation. On the government side, recognition of the central importance of technical education and research — a key not only to the rise of South Korea, but to all post-industrial nations — remains little more than a talking point. The private sector must shift focus from the current trend of acting as mere distributors or middlemen for global companies, and begin creating its own intellectual property. As long as the role models for young entrepreneurs remain those who secured distribution or franchise rights for foreign brands, it is unlikely that Egyptian industry will create much knowledge of global value.
Role models for a new type of entrepreneur — one who creates, rather than acquires, valuable knowledge and technology — do exist here. To shine some light on Egypt’s rising breed of rising technopreneurs, ...
Business Today-Egypt
Botswana leads fractured SADC EPA negotiating team
As the December deadline draws nearer, Botswana is leading the SADC team at the on-going trade negotiations between the European Union and ACP countries on Economic Partnership Agreements in Brussels, the Acting Permanent Secretary in the Ministry of Trade and Industry Gaylard Kombani says.
But the SADC bloc Botswana is leading is made up of only eight - Angola, Mozambique, Namibia, Lesotho, Swaziland, Tanzania , South Africa and Botswana itself - of the 15-member bloc.
Other members of SADC are negotiating under COMESA, while the islands states of Mauritius, the Seychelles and Madagascar also have their own negotiating bloc, the Pacific.
Some of the countries with Botswana are classified as Least Developing Countries (LDCs). These are Lesotho, Angola, Mozambique and Tanzania, which do not have the same challenges as Swaziland, Namibia, Botswana, and South Africa, which are characterised as developing countries.
Botswana is under pressure to strike a new trade agreement with Europe to ensure that its beef, which enjoys preferential treatment under the Cotonou Agreement, continues to benefit beyond the December 31 deadline, failing which it will have to compete with South American beef.
Responding to a questionnaire this week, the Ministry of Trade and Industry said the LDCs trade with the EU under the Everything But Arms (EBA) initiative, which accords their products duty-free and quota-free access into the EU market.
South Africa has a bilateral agreement [the Trade, Development and Cooperation Agreement (TDCA)] with the EU.
"This means that if the negotiations are not concluded by 31st December 2007, the LDCs and South Africa will continue trading with the EU under the EBA initiative and the TDCA respectively," says the Ministry. "The three countries (Botswana, Swaziland and Namibia) will have no fallback position and will lose the preferential market access they currently enjoy under the Cotonou Agreement."
Mmegi-Botswana
IFC to compete with Kenyan banks for SME clients
A shake up is looming in financing of small and medium enterprises following a change of tack by an international lender that will now see it compete directly with Kenya-based banks for business.
The International Finance Corporation is shifting from reliance on on-lending arrangements with local financial institutions, upping the stakes in the cut-throat competition commercial banks are already engaged in.
Leading banks—Standard Chartered, Barclays Bank, KCB and Equity Bank— are now styling themselves as the SME friendly lenders, with diverse products to back this claim.
A number of middle-sized banks such as Fina Bank, Prime Bank and ABC Bank have established relations with Kenya’s fastest growing sector. The entry of IFC into the scene offers not just choice, but hopes of lower rates, because its interest rates are substantially lower compared to market rates. IFC and some development finance institutions had tried to pass this benefit to borrowers through lines of credit in the past, but this experiment failed because banks exploited the difference to make windfall gains.
“We shall fund all kinds of businesses if there is a good proposal which is financially viable and has a development impact. This criteria is very important for us,” said senior IFC manager for Eastern Africa Jean Philippe Prosper.
Collateral for the loan varies by project. “We basically try to look at what we call the second way out. We look at the expected cash flow of the business, and how it is going to be possible to repay the loans. This is part of the policy of how we do that,” he added.
It says it can fund business whose owners may require funding but do not have enough security to back loans between Sh3.5 million to Sh35 million. It is also seeking partnerships within the businesses which must have been in operation for at least a year. To avoid crowding investors and lenders from the private sector, it is providing a maximum of 25 per cent of the total estimated funding required, or on an exceptional basis, up to 35 per cent in small projects.
“For expansion projects, IFC may provide up to 50 per cent of the project cost, provided its investments do not exceed 25 per cent of the total capitalisation of the project company.”
Previously, the group used to lend money to established financial institutions for onward lending to individual businesses. IFC will now join an increasing list of local banks who have come up with products specifically targeted at small and medium scale business.
Business Daily Africa
The International Finance Corporation is shifting from reliance on on-lending arrangements with local financial institutions, upping the stakes in the cut-throat competition commercial banks are already engaged in.
Leading banks—Standard Chartered, Barclays Bank, KCB and Equity Bank— are now styling themselves as the SME friendly lenders, with diverse products to back this claim.
A number of middle-sized banks such as Fina Bank, Prime Bank and ABC Bank have established relations with Kenya’s fastest growing sector. The entry of IFC into the scene offers not just choice, but hopes of lower rates, because its interest rates are substantially lower compared to market rates. IFC and some development finance institutions had tried to pass this benefit to borrowers through lines of credit in the past, but this experiment failed because banks exploited the difference to make windfall gains.
“We shall fund all kinds of businesses if there is a good proposal which is financially viable and has a development impact. This criteria is very important for us,” said senior IFC manager for Eastern Africa Jean Philippe Prosper.
Collateral for the loan varies by project. “We basically try to look at what we call the second way out. We look at the expected cash flow of the business, and how it is going to be possible to repay the loans. This is part of the policy of how we do that,” he added.
It says it can fund business whose owners may require funding but do not have enough security to back loans between Sh3.5 million to Sh35 million. It is also seeking partnerships within the businesses which must have been in operation for at least a year. To avoid crowding investors and lenders from the private sector, it is providing a maximum of 25 per cent of the total estimated funding required, or on an exceptional basis, up to 35 per cent in small projects.
“For expansion projects, IFC may provide up to 50 per cent of the project cost, provided its investments do not exceed 25 per cent of the total capitalisation of the project company.”
Previously, the group used to lend money to established financial institutions for onward lending to individual businesses. IFC will now join an increasing list of local banks who have come up with products specifically targeted at small and medium scale business.
Business Daily Africa
Developing countries can harness trade for growth
by Pascal Lamy*
Today’s global economy — which could be widened and strengthened by the conclusion of the Doha Round — is fundamentally changing the development dynamic, creating huge potential for developing countries to harness trade as an engine of growth.
But to seize this opportunity, they also need access to the basic infrastructure that drives globalisation — 21 st century transport corridors and telecommunications networks that can connect exporters to world markets, and the sophisticated expertise and institutions needed to navigate a highly complex world trading system.
Some of these pieces are in place but many others are no, and the necessary investments cannot be supplied by developing counties alone.
Aid-for-Trade is about helping to fill these “gaps” — mobilizing and leveraging the required financial resources — and providing a catalyst for the increased trade, investment and growth. It is about helping developing countries to benefit from the world trading system.
But it is also about strengthening the world trading system itself, by ensuring that its opportunities are more widely shared.
These are major challenges . First, the importance of national leadership and vision, backed by a comprehensive strategy for getting there. No one can tell a country how to trade or become more competitive. The only successful export-led growth strategy is one which countries want themselves, and that they design and implement on their own.
So the first step towards mobilizing Aid-for-Trade is to make trade capacity and infrastructure a national priority shared across government — including trade, finance, planning, agriculture, and other key ministries.
Second, we need to focus on the financing that is required, how to mobilize it, and how to deliver it more efficiently and effectively. We need to look at what has worked, what hasn’t, and why.
Third, we need to focus on the role of the private sector — for the simple reason that it is farmers, businesses and companies that trade, not governments. And because private investment, both foreign and domestic, must be a major part of the answer to capacity and infrastructure building, we need to focus on the incentives that are required to leverage private resources.
What we are undertaking is ambitious. I think ambition is good; it is how we will get results. Our goal is more and better Aid-for-Trade, all aimed at helping developing countries to take advantage of trade opening and the trading system.
*Lamy is Director-General, World Trade Organisation
Today’s global economy — which could be widened and strengthened by the conclusion of the Doha Round — is fundamentally changing the development dynamic, creating huge potential for developing countries to harness trade as an engine of growth.
But to seize this opportunity, they also need access to the basic infrastructure that drives globalisation — 21 st century transport corridors and telecommunications networks that can connect exporters to world markets, and the sophisticated expertise and institutions needed to navigate a highly complex world trading system.
Some of these pieces are in place but many others are no, and the necessary investments cannot be supplied by developing counties alone.
Aid-for-Trade is about helping to fill these “gaps” — mobilizing and leveraging the required financial resources — and providing a catalyst for the increased trade, investment and growth. It is about helping developing countries to benefit from the world trading system.
But it is also about strengthening the world trading system itself, by ensuring that its opportunities are more widely shared.
These are major challenges . First, the importance of national leadership and vision, backed by a comprehensive strategy for getting there. No one can tell a country how to trade or become more competitive. The only successful export-led growth strategy is one which countries want themselves, and that they design and implement on their own.
So the first step towards mobilizing Aid-for-Trade is to make trade capacity and infrastructure a national priority shared across government — including trade, finance, planning, agriculture, and other key ministries.
Second, we need to focus on the financing that is required, how to mobilize it, and how to deliver it more efficiently and effectively. We need to look at what has worked, what hasn’t, and why.
Third, we need to focus on the role of the private sector — for the simple reason that it is farmers, businesses and companies that trade, not governments. And because private investment, both foreign and domestic, must be a major part of the answer to capacity and infrastructure building, we need to focus on the incentives that are required to leverage private resources.
What we are undertaking is ambitious. I think ambition is good; it is how we will get results. Our goal is more and better Aid-for-Trade, all aimed at helping developing countries to take advantage of trade opening and the trading system.
*Lamy is Director-General, World Trade Organisation
Tanzania to host top meeting on aid for African trade
A high level meeting for African trade, finance and development ministers on building support for the global aid- trade initiative under the World Trade Organization (WTO) is slated for Dar es Salaam early next month.
The African Development Bank (AfDB) will on October 1-3 host the meeting - one of three regional Aid for Trade meetings to be held before the end of the year - designed to encourage beneficiary countries to make trade a greater development priority, and to encourage aid donors to scale up trade-related development assistance.
Aid for Trade is needed to train developing country trade officials to effectively participate in WTO activities. It also intends to improve trade related infrastructure in Africa, to help African countries implement commitments they will take in the Doha Round while providing adjustment assistance necessary to reform trade regimes.
"African trade is growing - trade has risen nearly five times in twenty years and exports have raised an average of 15 per cent annually since 2000 - but the continent's share of world trade still lags behind. By reducing trade barriers and paring back distorting subsidies, an agreement would create real opportunities for African businesses in the world marketplace," a joint statement by AfDB president Donald Kaberuka and WTO Director-General Pascal Lamy said.
In 1950, Africa's share was 10 per cent, but today its share hovers at less than 3 per cent. With exports of goods and services having grown 20 fold to more than $14 trillion since 1950, a return to market share of 10 per cent would mean a vast expansion of resources. "But this will not come without effort and money," they noted.
The two leaders ascertain that infrastructure and enhanced customs procedures are two solutions to improving African trade performance. But Africa suffers from underdeveloped roads, ports, rail and telecommunications systems.
IPP Media-Tanzania
The African Development Bank (AfDB) will on October 1-3 host the meeting - one of three regional Aid for Trade meetings to be held before the end of the year - designed to encourage beneficiary countries to make trade a greater development priority, and to encourage aid donors to scale up trade-related development assistance.
Aid for Trade is needed to train developing country trade officials to effectively participate in WTO activities. It also intends to improve trade related infrastructure in Africa, to help African countries implement commitments they will take in the Doha Round while providing adjustment assistance necessary to reform trade regimes.
"African trade is growing - trade has risen nearly five times in twenty years and exports have raised an average of 15 per cent annually since 2000 - but the continent's share of world trade still lags behind. By reducing trade barriers and paring back distorting subsidies, an agreement would create real opportunities for African businesses in the world marketplace," a joint statement by AfDB president Donald Kaberuka and WTO Director-General Pascal Lamy said.
In 1950, Africa's share was 10 per cent, but today its share hovers at less than 3 per cent. With exports of goods and services having grown 20 fold to more than $14 trillion since 1950, a return to market share of 10 per cent would mean a vast expansion of resources. "But this will not come without effort and money," they noted.
The two leaders ascertain that infrastructure and enhanced customs procedures are two solutions to improving African trade performance. But Africa suffers from underdeveloped roads, ports, rail and telecommunications systems.
IPP Media-Tanzania
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