India steps up scramble with China for African energy

by Louise Redvers

India has stepped up its efforts to gain an economic foothold in Africa in a new scramble with China for the continent's resources, signing energy deals with top oil producers Angola and Nigeria.

India has lagged behind China's aggressive courting of African nations to secure rights to energy as well as raw materials.

Beijing is using its deep pockets to build roads, railways, even a new parliament building in Malawi, to win favour across Africa, deploying at least half a million Chinese workers to labour on projects around the continent.

India's democratic system and often lumbering bureaucracy have left it slower to make inroads and less likely to fund big projects, since government must account for all spending to parliament.

But this month India deployed two high-level missions to the continent, with Oil Minister Murli Deora last week leading a delegation of top energy executives through Sudan, Nigeria, Angola and Uganda.

India's state Oil and Natural Gas Corporation (ONGC) left with deals for 359 million dollars worth of investments in Nigeria and an agreement for joint exploration and refining projects with Angola, seen as a precursor to a broader future deal.

Deora also tried to patch up a dispute over payments on oil deals in Sudan while discussing major new oil finds in Uganda.

Nigeria is already India's largest African trading partner, at about 10 billion dollars annually, and Deora said in Lagos that his country wants to see that figure grow.

India's flagship gas company GAIL has expressed an interest in liquefied natural gas (LNG) projects in Angola and Nigeria, Africa's two top oil producers.

India also offered to invest billions in building and refurbishing refineries in Angola and Nigeria, which cannot process enough crude to meet their fuel needs.

"India has been trying to get its foot into Angola for a long time so this is a significant development," said Edward George, Africa-China specialist the Economist Intelligence Unit in London. "The key will be the next licensing rounds to see if ONGC can win oil blocks," he said.

India had lost out on previous attempts to win contracts in Angola, much in part to Chinese competition, but GAIL chairman Shri BC Tripathi played down rivalry between the growing giants.

"We don't see China as a direct competitor but we know they are like us and have a growing economy so need to source oil," he said in Luanda.

India's ambassador to Angola, AR Ghanashyam, believes the latest deal is just the start of co-operation with India and pointed out that ONGC was already working with Sonangol in Iran. Trade between the two nations is expected to exceed two billion dollars this year, up from 1.3 billion dollars in 2007/8 and from 300 million dollars the year before, mostly in oil exports to India. Trade with China last year totalled more than 25 billion dollars, however, as Angola became the country's fifth-largest supplier of oil.

China has granted Angola an estimated 10 billion dollars in loans, compared to around 70 million dollars in Indian loans, mainly for rebuilding a railway in southern provinces. In practical terms as well, China has a larger physical presence in Angola, with more than 40,000 workers, compared to 1,500 Indians.

"We are a much smaller country that China," Ghanashyam said. "We have half their GDP and cover one third of the area but give us 20 years and we will catch them up."

Analysts said Africa could benefit from increased competition.

"It's very good for Africa to have another investor to compete with China because it will drive competition and hopefully bring benefits in terms of quality and delivery," George said.

AFP

Kenya exporters relieved as US extends AGOA trade benefits

by Jevans Nyabiage

Kenyan exporters got a reprieve after US president Barack Obama extended trade benefits under the African Growth and Opportunity Act (Agoa).

But the country may not afford spats with the Obama administration if it wants to continue reaping from the opportunities in the American market. The US has been pressuring Kenya to implement key reforms to avoid the recurrence of political violence experienced two years ago.

Local exporters were worried that President Obama could delist the country from the Agoa initiative for 2010 due to the growing diplomatic row between the US and Kenya over the pace of reforms.

The US removed Guinea, Madagascar and Niger from the list of countries benefiting from Agoa saying the three countries’ democratic progress is threatened by political turmoil and had failed to make “continual progress” in meeting US’s requirements for the trade arrangement.

For Niger, the US also suspended non-humanitarian aid and imposed travel bans on some government officials in response to president Mamadou Tandja’s moves to extend his tenure.

President Tandja’s term was to end on December 22, 2009. Earlier in December, Mr Obama sent Mr Tandja a message calling for more democracy. The US also froze $20 million in aid to Niger under its US Millennium Challenge Corporation agreement with the country.

“The main point of Agoa is to reward countries that perform well,” Mr Anthony Newton, the director of the economic policy staff in the State Department’s Bureau of African Affairs, said on December 24.

A United Nations report recently blamed Guinea’s junta leader Moussa Dadis Camara for the September 28 killings of more than 150 pro-democracy marchers by security forces.

“The country that demonstrates good governance and respects democratic norms is certainly more liable to have good economic policies as well,” Mr Newton said. The government is responsible for society and the economy as a whole, he added.

Guinea, the world’s top exporter of bauxite and a pivotal country for the security of West Africa, has been on the brink of chaos since the massacre and a botched assassination attempt against Camara on December 3 by his former aide de camp. Mauritania, which had been suspended, is now eligible for preferential US tariff treatment under the programme, according to the Obama administration.

The US provides duty-free treatment for nearly 6,500 eligible items such as clothing, cocoa, wood, leather, processed foods and cut flowers under Agoa. But the biggest single import under the programme is oil. To be eligible, countries must be making continual progress toward establishing the rule of law and political pluralism, the protection of human rights and workers rights and efforts to fight corruption.

Several African countries have had their Agoa benefits suspended over the past decade due to political instability caused by coups. On January 1, 2009 president George W Bush suspended Agoa benefits for Mauritania in response to a military coup in August 2008, while in 2004, he suspended Agoa benefits for the Central African Republic and Eritrea. In 2005, Cote d’Ivoire was suspended following years of political unrest.

Kenya, which hosted the Agoa conference recently, nearly had its benefits suspended last year, following the disputed election results in December 2007 that was followed by violence. But the country remained a beneficiary after political leaders formed a grand coalition government.

Some senior government officials have been banned from travelling to the US for allegedly blocking reforms. Eligibility is also hinged on protection of intellectual property, fight against corruption, poverty reduction, improved health care and educational opportunities, protection of human and workers’ rights, and elimination of child labour.

The textile industry is one of the leading players in the Agoa arena, with firms located in the export processing zones having supply contracts with US buyers. Statistics show that in 2008 the returns from the Agoa initiative accounted for the bulk of Kenya’s total trade with the US, adding up to some $300 million (Sh2.3 billion).

According to the Economic Survey 2009, direct employment in the garment and apparel sector that is heavily supported by the Agoa initiative stood at 25,776. Analysts say the potential benefits of Agoa have not been fully exploited.

Also of concern is that African exports under Agoa have declined in recent years. In 2008, of the $81.3 billion worth of exports from Agoa-eligible African countries, merchandise valued at $66.2 billion entered under the Agoa duty-free provisions.

Even with the duty-free and quota-free market access provisions, African countries have not been able to effectively exploit the preferences. The reason is that African countries are not competitive.

The Nation

China banks make more Africa loans

by J.R. Wu

Chinese state-owned banks are expanding their lending in Africa, the latest broadening of China's investment push on the continent. Backed by nearly $9 trillion in deposits, Chinese banks are beginning to finance projects from small businesses to a giant power station. These deals, arranged directly with African banks and companies, mark a departure from the government-to-government contracts struck in the past decade between African nations and China's state investment funds and policy banks.

China's state-owned banks appear eager to lend more. On december 22 in Beijing, Jiang Jianqing, the chairman of state-owned Industrial & Commercial Bank of China Ltd., said China should consider lending some of its $2.3 trillion in foreign-exchange reserves to the country's commercial and policy banks, which would use the cash to finance overseas investment by Chinese companies.

Mr. Jiang's ICBC, the country's largest bank, is among those increasing China's footprint in Africa. In 2008, it took a 20% stake in Johannesburg-based Standard Bank Group Ltd., South Africa's largest bank by assets. The deal, valued at about $5.5 billion, was at the time the biggest foreign investment by a Chinese entity. In May, the two banks won a bid to finance a $1.6 billion power-station project in Botswana.

"There is such a huge demand for financing on the African continent that the more the better, and the cheaper the better," said Jacko Maree, chief executive of Standard Bank.

The Botswana power station, set to be completed by 2013, is expected to cut the country's reliance on power from neighboring South Africa. Nearly $1 billion of the deal will pay a Chinese contractor that is building the station.

Also in 2009, China's second-largest bank, state-owned China Construction Bank Corp., extended a $100 million credit line to Industrial Development Corp., the South African government's development-finance arm. The deal, the Chinese bank's first with IDC, aims to provide loans to small borrowers.

In November 2009, China Development Bank Corp., a former state-run policy bank that recently transformed itself into a shareholding lender, opened its first branch on the continent in Cairo.

The arrangements should further bolster trade between China and the continent, which rose to $107 billion in 2008, from about $4 billion in 1995.

The latest wave of loans mark a departure from China's dominant investment model in Africa -- primarily, agreements between the likes of the Export-Import Bank of China, a state-run policy bank, and African governments.

The China-Africa Development Fund, a Chinese state investment arm, says it has also deployed most of its $1 billion in seed money and plans to grow to about $5 billion in investments.

Such bilateral deals have at times drawn criticism for their lack of transparency by observers including the Rockefeller Foundation and the World Bank. Little information has been released on projects that have included, for example, awards of big contracts to Chinese firms, they say.

Earlier this year, Namibian authorities began investigating an alleged graft case involving Chinese security equipment provider Nuctech Co., which was once run by Chinese President Hu Jintao's son Hu Haifeng, and which had won a deal to supply scanners for Namibia's ports and airports. Namibian authorities haven't made specific charges regarding Mr. Hu. China has said it is cooperating with Namibian authorities.

China's lenders say they are doing their best to navigate unfamiliar terrain with projects that hold up to public scrutiny.

"We still have a very good reputation in most of the countries on the African continent, and we are still building...higher, positive reputation" in Africa, said Lv Zhengyi, a project manager in Johannesburg for the China-Africa Development Fund.

The World Bank has estimated Africa will need $93 billion a year over the next decade to close the continent's infrastructure gap with developed parts of the world. Many African countries, sorely short of capital, have found China a helpful partner in funding and building roads, water supply, power and communication networks.

Some African analysts are worried that a flood of new financing will hobble African companies just beginning to wade into the global marketplace. A recent policy brief published by the African Center for Economic Transformation, a Ghana-headquartered think tank, recommended that Chinese investments improve the competitiveness of African companies, but that Africa take the initiative. "If China is to become an important partner, African policy makers must drive the agenda," it said.

Wall Street Journal

Russia expects trade with Egypt to reach $4 billion in 2009

Russia expects trade with Egypt to total $4 billion in 2009, Foreign Minister Sergei Lavrov said after talks with his Egyptian counterpart Ahmed Aboul Gheit.

"Egypt is one of the few countries whose trade was not affected by the crisis. We expect trade to reach $4 billion," he said.

The two foreign ministers signed a cooperation plan for 2010 in late December.
"The document embraces our bilateral projects as well as international problems, including Middle East issues, the situation in Africa, Central Asia, as well as disarmament and nonproliferation issues and the UN activity," Lavrov said.

Egypt is one of the largest and most economically developed countries in the Middle East and Africa and also Russia's traditional business partner in the region. Bilateral trade grew more than fivefold in the past five years.

In 2008, the total volume of Russian-Egyptian trade and economic cooperation exceeded $4 billion.

The number of Russian tourists who visited Egypt in 2008 was 1.8 million and may reach 2 million by the end of 2009.

 RiaNovosti

 

South Africa-Zimbabwe border post cause of trade bottlenecks

by Jean Jacques Cornish and Hopewell Radebe

The success of the Chirundu one- stop border post being commissioned between
Zambia and Zimbabwe, near Kariba, is putting pressure on the Southern
African Development Community (Sadc) to speed up the establishment of a
similar operation at Beitbridge.

Zimbabwean authorities at the weekend blamed inadequate parking as a reason
for congestion at the Beitbridge border post on the South African side. This
forced travellers and long-distance truck drivers to queue for hours to be
cleared before crossing the border.

Beitbridge is among the busiest border posts in the Sadc economic region,
with volumes rising to more than 12000 travellers and 3500 vehicles a day in
the festive season.

The Common Market of East and Southern Africa (Comesa) says traffic is
moving faster at the Chirundu border post.

The Chirundu system is subSaharan Africa's first. Funded by Britain's
department for international development and the Japanese International
Co-operation Agency, it is part of the North-South Corridor project to move
traffic quickly and efficiently from central and east Africa to southern
ports.

During the official commissioning ceremony at Chirundu, Zimbabwe's
President Robert Mugabe expressed concern that traffic moving quickly
through the Zambia-Zimbabwe border would hit a bottleneck at Beitbridge.
Sadc executive secretary Tomaz Salamao replied that Beitbridge would be the
next one-stop border operation.

According to Comesa secretary- general Sindiso Ngwenya, that will happen in
the next 12 to 18 months. "Chirundu is a Comesa project, and Sadc will be
taking the lead on Beitbridge. We will give it all possible support. With
the necessary political will, there is nothing to stop this.

"We have also identified border posts in Malawi, and on the frontiers of
Tanzania and Rwanda and Uganda with Kenya, to become one-stop operations. SA will do the same thing on its border with Mozambique," Ngwenya said.

Home affairs spokeswoman Siobhan McCarthy said that in the past two years SA had piloted the one- stop border concept in peak periods on the Mozambican
border, which until recently had more traffic than Beitbridge. "We're
piloting it at Lebombo with the hope that during 2010 we'd extend it to
other border posts, including Beitbridge."

Ngwenya said that with vehicle theft in the region, the problem now was to
find a faster way to get Interpol clearance when taking a car across the
border.


Business Day

US removes trade benefits from Niger, Guinea, Madagascar

US President Barack Obama has removed Madagascar, Guinea and Niger from a list of African countries receiving trade benefits, but reinstated Mauritania, according to the White House.

The decision was taken as the United States conducted an annual review of the Africa Growth and Opportunity Act (AGOA) program, which evaluates participating countries in part on the strength of democratic reform. The three countries removed from the program have all seen democratic backsliding in the past year.

In Niger, President Mamadou Tandja has refused to relinquish office at the end of his term, while both Guinea and Madagascar have seen military or military-backed coups.

Mauritania was also the scene of coup last year, but the country held elections in July that returned coup-leader Mohamed Ould Abdel Aziz to power.

The AGOA program passed Congress in 2000 and establishes a framework of economic cooperation with the African continent that runs through 2015.

Niger, Madagascar and Guinea will be suspended from the program for a year.

AFP

Trade deal on bananas finally agreed

The world's longest-running trade dispute has rumbled on for 13 years, but some initials on a document in Geneva mean that Europe will gradually bring down tariffs on banana imports.

Banana producers in Latin America will be subject to lower EU import tariffs as a result of the deal, which should make them more competitive with producers in Africa and the Caribbean, who pay no tariff.

The price of bananas could fall by 12% as a result. The formal agreement will be signed in six to nine months' time.

The move is likely to disadvantage the banana industries in Africa, the Caribbean and the Pacific (known as the ACP countries), who do not pay tariffs on imports to the EU.

Many of them have economies heavily reliant on banana production, and rely on the EU tariffs to secure them access to the European market.

BBC

Deglobalization:The surprisingly steep decline in world trade

by Daniel Gross 

In November, I met with an executive at one of China's new private equity firms. He talked up the firm's investments in energy software and mobile communications. But companies that export? He wouldn't touch them.

The fact that China's smart money is now looking inward and avoiding the sector that brought it so much growth in recent years highlights a surprising and spreading new trend: deglobalization.

For the last few decades, goods, services, and people have been whizzing around the world at ever-greater speeds and over ever-greater distances. The presumption was that globalization was the most efficient way to organize the world's economic affairs. But now comes the backlash, motivated by economics, politics, and the shift of wealth from West to East.

In the months after September 2008, pretty much every metric that testified to the growing interconnectedness of the global economy collapsed. Between April 2008 and April 2009, foreign currency trading volumes in London were down 25 percent.

The Inter-American Development Bank in August reported that remittances from Latin America and Caribbean expats would fall 11 percent in 2009, back to the level of 2006. The International Monetary Fund projects that the volume of world trade in goods and services will plummet nearly 12 percent in 2009.


Of course, you'd expect such developments when the global economy shrinks, as it did in 2009 for the first time since 1944. But the decline in trade was far larger than the quite small drop in global economic output. It turns out that many aspects of globalization were overleveraged. Exports, currency trading, and cross-border investment were fueled by debt and credit. In the United States, consumption of imports was stoked by borrowing and the booming housing market.

While trade has rebounded from its lows, the volume is nowhere near its peak. In September, the combined total of U.S. imports and exports was 24 percent below the level of July 2008. Countries stung by the sudden drop-off in demand from foreign buyers have realized that they can no longer simply export their way to prosperity. China's exports fell 23 percent between August 2008 and August 2009. Smart investors are channeling resources to companies that produce domestic goods for domestic markets.

There's also a greater appreciation on the part of Western firms that cheap labor isn't the be-all and end-all. Businesses have learned in the past two years that the longer the supply chain, the more possibilities there are for disruptions—from flu viruses, geopolitical disturbances, and spikes in energy prices. While China is still the world's factory, in an age of volatile demand, some companies have realized that manufacturing closer to home is more efficient, even if production costs are higher.

In March U.S. Block Windows, an acrylic block window manufacturer based in Pensacola, Fla., bought competitor Hy-lite, a division of Fortune Brands. Hy-Lite was outsourcing the molding of acrylic blocks to China. "It became very evident to us, that we could do it cheaper in-house, because we had the facilities, and we were operating at less than capacity," said Roger Murphy, president of U.S. Block Windows. More significantly, manufacturing in China had its downsides. U.S. Block Windows ships orders within four days of receipt. But the lead time in production from China was 12 to 16 weeks. In a period where it's difficult to forecast demand far out into the future, "it's very difficult to match those two things up," said Murphy. In September, U.S. Block Windows moved Hy-Lite's molding work from China to Florida.

Politics is also playing a role in deglobalization. The plunge into recession triggered a predictable set of protectionist responses. Developed economies in Asia, Europe, and North America have erected new tariffs, offered subsidies to exporters, stipulated that stimulus funds be spent locally, and provided special support to home-grown banks and automakers. This trend has led American and foreign companies alike to reconsider the way they've approached the vast U.S. market, especially in areas that are getting a boost from the government: energy, finance, automaking.

For example, Suzlon and Vestas, Indian and Danish wind-turbine makers, respectively, are making massive investments in U.S. manufacturing not only because it's expensive to ship turbines long distances but also in order to be perceived as "American" to state and federal officials involved in green purchasing.

In November, Ted Strickland, the governor of Ohio, one of the states hit hardest by globalization, showed up at a corporate campus in Milford, a suburb of Cincinnati, to celebrate the fact that Tata Consultancy Services, the Indian outsourcing giant, now employed 300 workers at its North America Domestic Delivery Center. The outsourcer has become an in-sourcer. Perhaps we're not seeing deglobalization, but rather, reglobalization.

Slate

China 'overtakes Germany as world's largest exporter'

China's exports rose 17.7% in December, state media has reported, suggesting the country has overtaken Germany as the world's largest exporter. The rise, compared to a year earlier, breaks a 13-month decline in trade as a result of the global downturn.

Xinhua said total exports for 2009 were $1.2tn (£7.5tn), but that total foreign trade over the year was down 13.9%.

Correspondents say the figures will lead to new demands from China's competitors that it devalue the yuan.

Last year saw a continuing decrease in China's trade as the global economic downturn led to a fall in demand for its products. But in the last few weeks of the year, there was a far greater rise than forecasters had expected, with foreign exports reaching $130.7bn, up 17.7% on the previous December.

China's General Administration of Customs (GAC) said exports overall in the year were $1.2tn, down 16% from in 2008, while imports were 11.2% down from a year earlier at $1.01tn.

The politically sensitive total trade surplus was down 34.2% to $196.1bn, a fall of almost a third.

The figures suggests China will surpass Germany's export total for the whole of 2009, although this will not be confirmed until Germany's full-year data is published in February.


A spokesman for GAC said the increase was "an important turning point" for the country.

"It is safe to say now that Chinese exporters have come right through the period of weakness," Xinhua quoted statistician Huang Guohua as saying.

Many of China's producers are low-cost manufacturers who assemble equipment such as i-Pods using foreign components.

The latest figures are being seen as an indication that those manufacturers have proved resilient in the downturn and are benefitting as their customers restock. But the figures are likely to lead to renewed complaints from China's trading competitors that its currency is undervalued, he added.

Led by the US, they say it is unfair that China has been able to make its good cheaper by keeping the yuan weak, but Prime Minister Wen Jiabao has said China "will not yield" to foreign demands that it revalue the currency.

Beijing has long said that it will not allow the yuan to trade freely until its domestic economy was strong enough to pick up any resulting decline in exports.

The slowing decline in Chinese trade has also been taken as a sign that the country's stimulus package is working.

Beijing raised tax rebates on exports several times in 2009, increased tax refunds and improved export credit insurance.

BBC

 

China 'becomes world's second largest economy'

China says its economy expanded by 8.7% in 2009, likely leap-frogging Japan to become the world's second largest economy behind only the US. The Chinese government also said the growth in the final quarter of 2009 accelerated by 10.7% from 2008.

But analysts say currency fluctuations make it difficult to compare China and Japan, and some experts question the accuracy of China's figures. Japan announces its latest GDP figures next month. Its economy is likely to have contracted by around 6% in 2009.


The announcement was made by China's National Bureau of Statistics (NBS).
The figures have exceeded the targets set by the Chinese government, the BBC's Chris Hogg in Shanghai says.

A government spokesman said China has recovered from the global downturn and was moving in the right direction.

China was hit by the world economic crisis during late 2008 and early 2009, but not as badly as other countries.

It recovered with the help of a massive government stimulus package.

BBC

Guinea-Chinese deal rests on $100 million deposit

by Saliou Samb and Richard Valdmanis

A Chinese fund has paid Guinea's ruling junta a $100 million deposit to guarantee a mining deal but the vast future proceeds seen flowing from the accord remain uncertain, Guinean sources have said.

The deal, signed before the political crisis sparked by a botched Dec. 3 assassination bid on junta leader Moussa Dadis Camara, was initially valued at $7-9 billion and seen as a lifeline to a government facing international isolation.

But the wording of the accord stipulates that even the initial deposit cannot be touched by the junta, according to the sources, while any future revenues depend on whether the West African state can return to some sense of stability.

"They have made a deposit of $100 million into the central bank, but we cannot touch it," said a Guinean central bank source who requested anonymity. "They (the Chinese) know there is a risk that if there is a change in power, their agreement will be cancelled," a separate government source said of questions hanging over the country's future leadership while Camara recovers in a Moroccan clinic.
Defence Minister and Camara loyalist Sekouba Konate has taken temporary control of the country, the world's top exporter of the aluminium ore bauxite and home to operations of major firms like Rio Tinto, Alcoa, and RUSAL.

The country is also believed to have untapped reserves of iron, gold, diamonds, and offshore oil and natural gas.

While there has been no move to impose a broad trade embargo in Guinea, it faces a ban on arms imports and junta members have been targeted with visa bans and other sanctions since a Sept. 28 crackdown on pro-democracy marchers that killed over 150.

ACCESS TO MINERALS AND ENERGY

China has boosted its resource investments around the world in recent years, particularly in Africa where it is seeking to lock up energy and minerals concessions to feed its rapid economic growth at home.

According to a source with knowledge of the accord, Camara allies clinched in June an accord with the Hong Kong-based China International Fund (CIF) to form a joint venture called Guinea Development Corporation (GDC).

Guinea would hold direct and indirect stakes amounting to 32 percent in GDC, with the rest held by CIF and majority-owned Angolan joint venture China Sonangol International, he said.

A copy of the accord showed it was signed on June 12 by Energy Minister Mahmoud Thiam and two other Guinean officials. Under its terms, GDC would have access to all the country's minerals and energy resources not currently being exploited by other companies. Some of the revenues realised by Guinea would be used to fund electricity, water and transport projects -- including a national airline, two government sources said.
It was not clear what conditions were attached to the release of the $100 million guarantee.

Thiam declined comment when reached by phone.

Beijing has distanced itself from CIF's mining deal, but a U.S. Congressional report earlier this year said some of its members work for the Chinese government. When contacted by telephone, the Chinese embassy in Conakry was not immediately available to comment on the deal.

With Camara still out of the country, it is not clear how future provisions of the deal will be implemented.

A separate central bank source said that an additional $200 million was now expected from CIF, but he could not give details on the timing of the payment or conditions for use.


Forbes

The economic implications of climate change issues

by Felicity Duncan|


By now you've probably heard about the UN Climate Change Conference in Copenhagen, and you're probably asking yourself, "Given the sorry state of the global economy, who really cares?"

It's a valid question; after all, we do have a lot of big problems to solve, ranging from terrorism to financial meltdowns to war. But the truth is that climate change is an important issue, especially from an economic perspective, and so we should all care.

Now, I'm sure many of you are sceptical about the whole climate change rigmarole, so I'll start by looking at climate change more generally, and then explore the key issues at the summit, to illustrate how they all boil down to the kinds of economic questions that could influence the future performance of your investments.

Effects

The logical place to start is to ask what climate change is actually expected to do to the world. In terms of effects, there are three main categories.


1. Rising temperatures

It's predicted that average global temperatures will rise, and that particular regions will experience significant changes in their average temperatures. These temperature changes could lead to issues for agriculture, since particular plants need particular climates in which to grow. Rising temperatures could also influence weather patterns, creating more frequent and more severe storms, hurricanes and typhoons.

2. Water shortages

Rising temperatures could create water shortages in many places by increasing evaporation rates and changing rainfall patterns. Africa is predicted to be especially hard-hit; many regions will become deserts, reducing the availability of arable land and hurting food production.

3. Rising sea levels

This is particularly worrying for small island nations like Fiji, Haiti, and the Maldives. These countries could be completely flooded if sea levels rise as little as one metre, which is predicted to happen by 2100 if nothing changes in our current practices. Rising sea levels would result from the melting of the polar ice caps, which is predicted to occur as average global temperatures rise.

Combined, these effects will make it harder to feed the people of the world, and will probably encourage mass migration from places threatened by rising sea levels, putting pressure on other areas, hence the perceived need for global co-ordination on solutions.

Who's in Copenhagen and what do they want?

There are two broad "teams" in Copenhagen, the rich countries and the poor countries. Admittedly it's more complex than that, but this is a good first cut.

Rich countries

This group includes the world's second and third biggest emitters (in terms of how many tonnes of carbon dioxide they emit in total), the USA and the European Union.

These rich countries, particularly the European ones, want a global deal that imposes emissions targets on all the world's emitters (that is, targets on how much CO2 and other nasties countries can release into the atmosphere). They want to see all rich countries promising emissions cuts, and they want poor countries to slow down their emissions growth.

Within this group, the US is a lot more reluctant on international targets than the European countries are. In fact, the last time the world got together and hammered out a climate change deal, in Kytoto, Japan, the US refused to sign it.

The Americans' hesitancy upsets the Europeans, who've already imposed ambitious emissions caps on themselves. Europeans worry that their caps put their businesses at a competitive disadvantage by imposing extra costs, and they want America to get on board to even things out.

Poor countries

Led by China (the world's biggest emitter in absolute tonnage terms), this group is willing to slow emissions growth, and even to cut emissions, but it wants rich countries to provide funding to help with this process.

These countries argue that rich countries have been the biggest emitters for years and are responsible for most of the damaging effects of climate change, and that it's unfair to make the poor pay for them.

Research suggests that poor countries - especially tiny emitters like African countries and small island nations - will be worst-hit by climate change, so they want rich countries to help mitigate these effects.

Furthermore, these countries argue that, on a per-person basis, rich countries are much worse emitters than poor ones. This is true, as data from the UN show. Each US citizen emits about 19.7 tonnes of CO2 every year; each European emits an average of 11 tonnes. By contrast, each Chinese emits 4.62 tonnes, each Indian 1.31 tonnes, each South African 8.59 tonnes and each Brazilian 1.86 tonnes.

Lifestyles in rich countries have a bigger carbon footprint than lifestyles in poor country, so it seems unfair that the rich can enjoy the high standards of living their intense carbon usage has given them, while the poor are being prevented from catching up.

Again, who cares?

With this background in mind, let's look at the economic implications of these issues.

First, there are the costs of emissions reduction. It's going to be expensive; the UN estimates it will cost about 3% of global GDP to stabilise emissions by 2030, while other experts put the cost at between 1 and 4% of global GDP. This means that a substantial chunk of global resources will be directed at these activities, pointing to some possible investment opportunities - although you should beware of "green" bubbles!

Second, there are knock-on effects of moves to reduce emissions. Fuel and energy will probably become more expensive, and the cost of doing business will go up as companies have to conform to new environmental standards. This could have particular implications for "dirty" industries like mining and mineral processing, manufacturing and agriculture, so it's another area to watch.

Finally, there are costs associated with mitigating climate change effects. One NGO estimates that the tab for dealing with increased hurricanes, real estate losses (think Cape Town property meets rising sea levels), energy-sector costs and water costs could come to $271bn by 2025, and $961bn by 2075 (in 2006 dollars).

Looks like we really are in for stormy weather.

Moneyweb

EU ends banana war with Latin America

by Darren Ennis

The European Union reached agreement in mid december to put an end to a decades-long trade dispute with Latin American and other smaller producers over tariffs on banana imports, diplomats said.

"Everybody is finally on board and an initialling of the deal is scheduled for Tuesday," one diplomat with direct knowledge of the negotiations said.

The deal resolves the world's longest-running trade dispute, which involves banana exporters in Latin America and other regions challenging the EU's preferential treatment of producers in the Africa, Caribbean and Pacific region.

The agreement means the European Union will steadily cut tariffs on bananas supplied from Latin America and other smaller producers such as Thailand and the Philippines.

Under the deal, the duties on bananas would fall to $114 a tonne by 2016 or a few years later from $176, with an initial cut to $148.

In return, Latin American banana producing countries are expected to drop challenges to the European Union, the world's largest trade zone, at the World Trade Organisation.

Poorer ACP growers in mostly former European colonies will get around 200 million euros ($293.3 million) in compensation for the negative effects the pact may have on the preferential treatment given to them by Brussels, diplomats said.

The deal is likely to reduce prices for consumers, increase competition in the banana market and strengthen the hand of low-cost Latin American exporters.

Although the United States does not export bananas, it is a party to the agreement because several big distributors and processors such as Chiquita, Dole and Del Monte are U.S. corporations and are likely to benefit from the deal. Irish company Fyffes, a major European distributor, will also gain from the new agreement.

Reuters

Imported cement hurts East African producers

by Cedric Lumiti

Cement from India, China and Pakistan into the East African Community (EAC) member states is hurting local manufacturers since it is sold 50% and 60% cheaper than the local price. This has forced the East African Business Council (EABC) to ask member state's governments to reclassify cement as a sensitive product to protect the domestic industry from collapsing.

EABC boss, Mr. Charles Mbogori said that the influx of cheap cement imports from countries with lower production costs has negatively affected the local industry.

Under the EAC Common External Tariff (CET), cement was classified as a sensitive product whose tariff was set at 55% in 2005, and was to be reduced at rate of 5% per year.

The EAC common external tariff is classified in three tariff bands of zero percent for raw materials, 10% for intermediate goods and 25% for finished products. Goods considered sensitive often attract a higher tariff.

“However, in June last year the sensitive status accorded to the cement was removed with import duty drastically reduced from 40% to 25% and this was done without consultation with the industry stakeholders,” Mbogori said.

He said unilateral decisions and lack of commitment by partner states to uphold the CET is tantamount to deliberate creation of an unpredictable policy environment in the region.

“Our cement producers are faced with high production costs resulting from high energy and labour costs, poor distribution networks, high transport costs and inadequate ancillary industries for spare parts and consumables which created an opportunity for cheap imports to make their way into the market,” he said.

“The cost of energy and transportation in the region is three to four times that of low cost countries,” he noted.

Although Uganda wants the tariff reviewed from the current 25% to zero percent to mitigate the effects of high prices on the construction sector, the East African Cement Producers Association (EACPA) argues the local industry has capacity to meet local demand.

The current production capacity for cement in East Africa is 9.5 million metric tons against a demand of 6 million metric tons.

“EACPA has assured us that the region has enough capacity to meet the regional demand but cannot fully utilise its installed capacity due to unfair competition from imported cheap and sub-standard cement,” Mbogori said.

“We therefore recommend that cement should be treated as a sensitive product and CET reverted to 35% or $50 per ton whichever is higher as per the Customs Union Protocol.

The $50 per ton is meant to protect the industry from unfair competition caused specifically by the current world economic crisis that has led to availability of cheap cement from Asia and the Middle East.


East African Business Week

A disproportionate number of trade barriers are imposed by African governments on other Africans

by Alec van Gelder & Timothy Cox

Edmund Conway (“The deal at the Doha Round that could really save the world,” December 3) notes that an important barrier to African development is lack of free trade.

A disproportionate number of trade barriers are imposed by African governments on other Africans. The average customs transaction in poor African countries involves 20 to 30 parties and 40 separate documents. No wonder trade within Africa is the lowest of any region on Earth: doing business is more expensive than anywhere else.

Mr Conway rightly laments the failure to conclude the Doha Development Round at the World Trade Organisation. But African countries – or indeed any others – could remove their self-imposed barriers. In the past 30 years, Mauritius, Botswana and, lately, Rwanda have shown how poor countries anywhere can stimulate growth themselves.

They cannot remove the hugely damaging European Union Common Agricultural Policy, but nor can the World Trade Organisation. Global trade and growth need not await decisions in Geneva. Africans can do it themselves if only they are allowed to.

Timothy Cox
Alec van Gelder

http://www.telegraph.co.uk/comment/letters/6753637/Unreachable-emissions-targets...

Developing nations derail Cophenhagen

by Megan McArdle

I haven't been covering Copenhagen, because it has been abundantly clear to me from the beginning that nothing would be achieved.  Everyone's looking at the US . . . and the US Congress can't even deliver on pitifully small reduction targets.  Mostly, this always seemed like an opportunity to eat caviar and hobnob earnestly.  

But there has been one interesting development: the continuing emergence of developing nations as a bargaining bloc.  This first became a major issue during the Doha round of WTO negotiations, which were essentially scuttled by developing nations banding together to refuse the things the developed countries wanted (financial services liberalization), and demand things the developed nations didn't want to give (deeper cuts in agricultural protections).

On the latter, at least, they certainly had the right of things.  The Bush administration went to the wall trying to get our farmers to agree, and (even more difficult), the European Union to go along--whatever else you say about the man, he really did fight the good fight for free trade.  But ultimately it was no good; Doha died.  The prospects for further trade liberalization over the next decade or so seem pretty dim. 

Now we're seeing the same thing at Copenhagen.  Developing countries started the week by refusing to participate unless rich countries make deeper cuts.  Since China, the world's largest emitter, is involved, this is pretty much a deal breaker.  They've since rejoined the discussion after being promised that their concerns would be heard, but prospects seem pretty dim that they'll actually make a deal.  

As someone who likes national self-determination on general principle, it's stirring to see developing nations break with the previous tradition of unrealistic promises in exchange for handouts.  On the other hand, this does not bode well for multilateralism.  A bloc of 135 countries is an unwieldy negotiating partner, and while they have the power to demand huge concessions from the developed nations, that does not actually imply the power to secure them.

The Atlantic

Ghana, China trade hits nears $200million in 2009

by Emmanuel K. Dogbevi

Trade between Ghana and China has reached over $189.395 million as at the end of October 2009 according to official statistics published in the Chinese media.


In the first half of 2009, China invested about $552 million directly in Africa raising China’s direct investment in Africa to 81% from the same period in 2008.

Ghana’s exports to China totalled only $25 million with imports of $93 million in the year 2000. Exports grew to $32 million in 2003 with imports of $180 million. In 2006, the figure went up to $39 million for exports while imports surged to $504 million.

China recently gave Ghana some undisclosed financial support to be used to develop infrastructure for the country’s nascent oil industry.

On December 30, 2009 China granted Ghana two concessional financial facilities totalling 100 million Chinese yuan, approximately $14.65 million.

And on the same day the first batch of an 11-member Chinese medical team arrived in Ghana for a two-year medical mission. The six-member medical team, which includes experts in cardiology, anesthesiology, neurology and urology, is the first batch of the 11-member medical team. Its members were selected from hospitals in Guangzhou, capital of the southern Chinese province of Guangdong.

China has also offered to rebuild Ghana’s Foreign Affairs offices after it was razed down last year.


Ghana Business News

 

Zambia's copper export earnings rise in 2009

Zambia's copper export earnings climbed sharply in the fourth quarter of 2009, helping to swell the surplus on the trade account but a change in the tax regime saw the government earn less revenue from mining.

The central bank said copper export earnings rose to $984,6-million in the fourth quarter of 2009 versus $666,7-million in the same period in 2008 and cobalt export earnings were at $63,6-million from $45,3-million in 2008.
Zambia is Africa's top producer of copper and the industry is the mainstay of the economy, accounting for more than 60% of the country's foreign currency earnings.

Zambia's total export earnings reached $1,3-billion in the three months to December 2009 compared with $910,1-million in the same period the previous year, the central bank said in its review of the fourth quarter.

Due to the jump in export earnings the trade balance for the fourth quarter of 2009 registered a surplus of $311.6 million compared with a deficit of $88,9-million in the fourth quarter of 2008.

Despite higher export earnings, revenue from the mining sector fell to $77,7-million in 2009 compared with $128,4-million the previous year after the government changed tax rules and some mining companies scaled down operations.

Zambia last year abolished a 25% mineral windfall tax and Mines Minister Maxwell Mwale said the government had no plans to reintroduce it despite pressure to do so.

"The drop in tax revenues paid by mining companies was largely as a result of the global financial crisis, which forced most of them to scale down their operations," central bank Governor Caleb Fundanga said at a briefing.

Fundanga said the economy is likely to grow by 7% this year in part due to a recovery in copper exports. "They (foreign borrowers) were borrowing in kwacha at very high interest rates and then buying the foreign exchange, which they later sold, creating distortions."

Reuters

Anxiety over trade talks with EU as Kenya falters on negotiations

by Catherine Riungu

Is Kenya letting down the region by failing to lead the negotiations to conclude the Economic Partnership Agreements?

This is the big question facing East Africa as it enters 2010 without a binding trade agreement with the European Union, amidst mounting anxiety over how much longer the Community can continue trading “free” with the world’s largest economic bloc.

All fingers point at the country’s Ministry of Trade, which is expected to lead the region in the negotiations, but is now being accused of failing to show the way, yet Kenya would be the only loser in the event that Europe slapped duty on its imports dealing a devastating blow to some of its best established industries like horticulture.

Private sector sources, who cannot be named because of the sensitivity of the matter said that since the Cotonou Agreement expired in 2007, there has not been any serious attempts to accelerate negotiations for a suitable trading regime, and Kenya does not seem to realise the importance of steering the process to conclusion.

The main problem, our sources indicate, are the frequent reshuffles that have taken place at the ministry since the troubled 2007 General Elections. Consequently, not much has been happening and the export industry is beginning to get anxious about the future of trade with the EU.

“It takes at least a year for top officials in the trade ministry to understand these matters making it impossible for a new minister or a PS to steer the talks,” our sources said.

It was these changes that took the region up to mid 2008 to get a one-year interim EPA in place, that was to ensure trade was not disrupted, to give the negotiators time to conclude the talks.

Came July 31, last year when the parties had been expected to pave way for a new trade regime, but nothing was put on the table.

According to our sources, Kenya missed several crucial meetings held in Brussels meant to build up a case for the conclusion of the EPAs because the new officials did not feel sufficiently knowledgeable to sit in the meetings, leading to the stalemate.

On its part, the European Commission was organising for elections with a new parliament expected to take office last November, therefore, either way, the EPA negotiations took a back seat.

Now the EC has new office bearers who, like their EAC counterparts need time to acquaint themselves with the negotiation processes therefore there is no telling when the talks will restart or when they will conclude.

In the meantime, the interim EPA which expired last July still guides trade in the region, with the only conclusion being that the goods being traded between the two blocs are World Trade Organisation-compliant.

Under the arrangement, EAC can sell any goods to the EU duty-free while from Europe products that are produced in the region are not allowed save for essentials such as pharmaceuticals.

The industry now wants the parties to sign the interim EPA into a legal document until the full version is concluded to avoid creating a vacuum in international trade, should questions arise over its validity.

“We are all hoping for a breakthrough on the agreement framework when we meet next but the outcome will depend on the reality on the ground because there are divergent views and if consensus is not reached, then the contentious issues must be tackled first,” David Nalo, the permanent secretary at the EAC Affairs ministry was quoted as saying in December.

The interim EPA was not endorsed by Brussels and the EAC Heads of State Summit because the 25 EU partner states needed to interpret it first.

In December 2008 the interim EPA came back to the EAC with an amendment that the bloc has been opposing — the Most Favoured Nations clause ostensibly meant to give the EU preference over other continents when it came to business deals.

The EAC remains opposed to the clause and has demanded it be removed arguing that it should be defined to indicate that it would apply only when it was cost effective.

The East African

 

High duties keep food imports from poor countries out of Europe

by Monika Hoegen

Issa Ouedraogo from Ghana has as a dream.

On his 600 hectares of farmland, he cultivates cassava, coconuts, as well as grains and various fruits. Organic products sell well in Europe, and Ouedraogo would like to export his produce. But that is difficult, he says. His government should help small farmers like him more by providing cheap credits.

"If they were to do that, Africa, particularly Ghana, could also provide the other West African countries with food and other agricultural products," Ouedraogo said.

Neighboring African countries as well as Europe could become a lucrative market for Ouedaogo and other small farmers in developing countries. But the high import taxes charged by the EU pose a major impediment to international trade.

One particular problem is tariff escalation: Import tariffs increase the more processed a product becomes. This measure ensures that most imports to the EU are raw products like coffee, cocoa or pineapples which cannot be cultivated in Europe. 

While the import duties for unprocessed cocoa beans is rather small, the EU charges 30 percent for processed cocoa products like chocolate bars or cocoa powder, and 60 percent for some other refined products containing cocoa.

In some cases, tariffs can reach up to 146 percent, for instance for some canned tropical fruit specialties, says Francisco Mari, an expert on agriculture and fishies at the German protestant development service, EED.

"There is a wide range. If Arabica coffee would be roasted in Africa, the import tariffs would be 100 or 120 percent," Mari said.

This practise prevents competition from threatening European coffee roasting companies.

Critics have been arguing that the tariff policy exploits developing countries as suppliers of cheap, unprocessed food products without giving them a fair chance on the European market.

However, there have always been exceptions, for example for former British and French colonies.

Since 1975, the Lomé and Cotonou trade conventions provide that almost all agricultural products from 71 countries in Africa, the Caribbean and the Pacific - the so called ACP countries - enter the European market free of duty. Only a few products, like sugar and rice, are excluded from this regulation.

The agreement made banana imports from Africa cheap, while Latin American producers had to pay higher duties and felt disadvantaged. The ACP agreement did not include former Spanish colonies, which prompted Ecuador and Costa Rica to sue the European Union. They won the case in 2009. The EU now has seven years to lower import tariffs on bananas from 174 euros per ton to 114 euro.

"That is not fair," said agriculture expert Francisco Mari. "Banana production is more difficult and expensive in Africa than in Latin American countries. Production is cheaper because huge agro-multis (agricultural multinational corporations) are very active there."

He adds that many African farmers now fear that African bananas will be pushed out of the European market.

Even though the EU likes to seal its market off from competition, it has in fact lowered tariffs for some countries. Under the Everything-But-Arms-Initiative, the 49 poorest countries can sell all kinds of products tax-free within the EU, with the exception of arms.

But most developing countries do not benefit from such tax-exemptions because they simply have no capacities to build up a food industry geared towards exports.

And tariffs are not the only impediment to international trade. "We have found other ways to keep products from developing countries out of Europe, and to ensure their profits," said EED expert Francisco Mori, citing the so-called rule of origin.

It says that countries can export their goods to Europe duty-free, provided that every ingredient as well as the packaging originates in that particular country.

"For instance for juice, every ingredient has to come from that particular country – from the plastic container down to the last sugar cube," Mori explains. "For very poor countries, it is impossible to produce all these things themselves - that means, they loose the duty exemption."

The second problems is posed by the strict EU standards for imported food products, including hygiene and health standards as well as regulations for size, form and colour of a certain product.

While the regulations are supposed to protect European consumers, they can have devastating impacts on small farmers in export countries. In Morocco for instance, 40 percent of the tomato crop that is cultivated to be exported to Europe does not fit the European standards. So instead of being shipped abroad, the tomatoes are sold cheaply on Moroccan markets. Small local farmers have a hard time competing with the cheap produce and struggle to survive.

Deutsche Welle

 

Rwanda-Uganda border to open 24-7

The movement of people and goods from Uganda to Rwanda is to be facilitated 24 hours a day starting April next year, the two neighbouring states have agreed. The development comes following growing traffic of both cargo and passenger vehicles crossing the two borders.
The traffic is increasing with buses leaving Kampala as early as 11pm. They arrive at Katuna before 6am. However, bus operators complain that most times “the border is closed leaving passengers to suffer in the biting cold at the borders.”

Mr. Edward Mukaya, a regular traveller between Kigali and Kampala complained,” “We at times remain in the long queues for hours at the border for hours without customs and immigration officers in the office. These people start work at 6am which is lowering business.”

On a good note, Mr. Gerald Nkusi Mukubu, the Rwanda Revenue Authority (RRA) publicist, however, says the delays at the two borders are to be addressed.

This means more immigration staff, customs officials and security personnel are to be recruited to facilitate the 24-hour services at the border posts.

The passengers and truck drivers though, will have to wait for another five months before Uganda and Rwanda start implementing the 24-hour services at Gatuna and Katuna.

“It was proposed during the East African Community Revenue Authority Commissioner Generals meeting that Gatuna-Katuna border will remain open 24-hours by April next year,” Nkusi said.

The Kigali meeting was attended by revenue bosses from Burundi , Kenya , Uganda , Tanzania and Rwanda.

Bus operators and passengers have welcomed the 24-hour service saying it is timely and another important step towards regional integration.”

The planned 24 hours operations at Katuna and Gatuna come at a time Rwanda is also planning to ease cross border trade at its border with Burundi and DR Congo.

“We are starting with DR Congo border first,” Nkusi said on phone. Burundi will follow,” Nkusi said.

In June this year, The Economic Community of the Great Lakes Countries (CEPGL) border posts of the member countries were supposed to operate 24 hours, with effect from September, 1, 2009.

CEPGL member states include Rwanda, Burundi and DR Congo. The members also agreed that their nationals would use identity cards as travel documents for border residents for a period not exceeding three days. Rwanda offers a 90 day visa free stay to CEPGL nationals and has the work permit waived for EAC nationals.

East African Business Week