Inter Press ServiceTrade & Investment – Inter Press Service http://www.ipsnews.net News and Views from the Global South Mon, 18 Dec 2017 15:55:08 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.4 Money Talks at One Planet Summit in Parishttp://www.ipsnews.net/2017/12/money-talks-one-planet-summit-paris/?utm_source=rss&utm_medium=rss&utm_campaign=money-talks-one-planet-summit-paris http://www.ipsnews.net/2017/12/money-talks-one-planet-summit-paris/#respond Thu, 14 Dec 2017 12:27:17 +0000 Paris Correspondent http://www.ipsnews.net/?p=153552 As funding to combat climate change has lagged behind lofty words, the One Planet Summit in France this week invited governments and business leaders to put money on the table. The result was a significant number of international pledges – both for investment in green energy and divestment from fossil fuels – as various sectors […]

The post Money Talks at One Planet Summit in Paris appeared first on Inter Press Service.

]]>
Patricia Espinosa, executive secretary of the United Nations Framework Convention on Climate Change, at the One Planet Summit in Paris. Credit: AM

Patricia Espinosa, executive secretary of the United Nations Framework Convention on Climate Change, at the One Planet Summit in Paris. Credit: AM

By Paris Correspondent
PARIS, Dec 14 2017 (IPS)

As funding to combat climate change has lagged behind lofty words, the One Planet Summit in France this week invited governments and business leaders to put money on the table.

The result was a significant number of international pledges – both for investment in green energy and divestment from fossil fuels – as various sectors responded to the call from French President Emmanuel Macron for urgent action.Some of the drive at the summit came from small island states, which have been battered by recent hurricanes and other disasters.

“We’re not going fast enough,” Macron said at the Dec. 12 summit, which he co-convened with the United Nations and the World Bank. “Some countries present will see their territories disappear. We all have to move forward… The time is now.”

French multinational insurance company AXA announced that it plans to have 12 billion euros in green investments by 2020 and that it would divest 2.4 billion euros from certain coal-company activities.

Meanwhile the World Bank Group (WBG) highlighted its funding of projects in India for street lighting; in West Africa to tackle “coastal erosion, flooding and climate change adaptation”; in Indonesia regarding geothermal-power development; and with the Global Covenant of Mayors in a new “Cities Resilience Programme” (CRP).

“Over the next three years, the CRP will leverage $4.5 billion in World Bank loans to catalyze billions in public and private capital for technical assistance, project co-financing and credit enhancement,” said World Bank Group President Jim Yong Kim.

He said that the programme would essentially “act as an investment banker for cities to structure programs to address their vulnerabilities to climate change”.

Kim also announced that the World Bank would not be financing upstream oil and gas after 2019, but that in “exceptional circumstances”, consideration would be given to such financing in the “poorest countries” where there is a clear benefit in terms of “energy access for the poor”.

The bank said it was on track to meet its target of 28 percent of its lending going to climate action by 2020.

With these and other announcements, the One Planet Summit, held two years after the signing of the landmark Paris Agreement, aimed to add momentum to the push for adequate financing of climate adaptation and mitigation, said some observers, while others termed it a public-relations exercise.

The summit brought together heads of state, local government representatives, non-governmental organizations – and schoolchildren. Journalists were out in force, alongside United Nations delegations, at the Seine Musicale venue, an imposing new arts centre on an island in the river Seine, just outside Paris.

Government leaders arrived by boat with UN Secretary-General António Guterres, Macron and Kim, the co-convenors, for a packed afternoon of panel discussions and speeches, following morning events.

“Technological progress has already revealed the falsehood that responding to climate change is bad for the economy,” said Guterres. “Finance could be, should be and will be a decisive factor.”

Some of the drive at the summit came from small island states, which have been battered by recent hurricanes and other disasters.

Caribbean representatives announced the launch of a 8-billion-dollar investment plan to create the world’s first “climate-smart zone”. The bodies involved include the Inter-American Development Bank, the World Bank, the Caribbean Development Bank and private groups, forming a “Caribbean Climate-Smart Coalition”.

The goal is to find a way “to break through the systemic obstacles that stop finance flowing to climate-smart investments”, the Caribbean Development Bank said.

Juvenel Moȉse, Haiti’s president and a participant at the summit, spoke of the vulnerability of the region, emphasizing that all the islands are suffering from the impacts of climate change. He said that Haiti was in a “very fragile zone”.

American actor Sean Penn, also present, said he had got involved in helping Haiti to rebuild after the 2010 earthquake that devastated the country, and he said more financing was needed.

“I call on all those gathered to stand with Haiti,” he urged.

Meanwhile, Canada and the World Bank Group said they would support small island developing states to expand their renewable-energy infrastructure to achieve greater access to energy and to decrease pollution.

In side events around the summit, groups such as the International Development Finance Club (which groups 23 international, national and regional development banks from across the world), highlighted their “green financial flows”.

The group said that in 2016, IDFC members made new commitments representing 173 billion dollars in finance, an increase of 30 billion from 2015.

The eve of the summit, Dec. 11, was titled Climate Finance Day, and it was also the 20th anniversary of the Kyoto Protocol. Patricia Espinosa, the Executive Secretary of UN Climate Change (UNFCCC), told journalists that the long years of negotiations had provided a framework in which all sectors of society could take action, as governments “cannot do it alone”.

She said there was a growing sense of urgency, especially after recent extreme weather events that had seen some communities “losing everything they have built throughout their lives”. More support was needed for adaptation, she and other officials noted.

At the summit, the Agence Française de Développement – an IDFC member — signed accords with Mauritius, Niger, Tunisia and the Comoros – as part of the agency’s Adapt’Action Facility.

With financing of 30 million euros over four years, Adapt’Action seeks to “accompany 15 developing countries that are particularly vulnerable to climate change impacts, in the implementation of the Paris Agreement regarding adaptation,” the agency stated.

An official from Niger spoke compellingly of problems that included desertification. The country has been cited as an example of France not doing enough for its former colonies, and political analysts question whether that will change under Macron.

The European Union meanwhile said that its External Investment Plan (EIP) is set to mobilise some 44 billion euros to “partner countries in Africa and the EU Neighbourhood” by 2020.

Among its goals, the EIP aims to “contribute to the UN’s sustainable development goals while tackling some of the root causes of migration,” according to the EU.

Regarding Asia and the Pacific, officials at the summit said action by countries in the region were “encouraging”. Heads of state included the prime ministers of Bangladesh and Fiji, who spoke of their climate initiatives. Fiji’s Prime Minister Frank Bainimarama said the country was among the first emerging states to offer a green bond.

The international nature of the summit made the U.S. absence even more noticeable. As U.S. President Donald Trump had announced earlier this year that the country would withdraw from the Paris Agreement, he was not invited, French officials said.

Other American climate figures were present, however, such as businessman and former New York Mayor Michael Bloomberg, former California governor and actor Arnold Schwarzenegger, Microsoft founder Bill Gates and former Secretary of State John Kerry.

Bloomberg said that around the world, businesses were taking “responsible” action because investors want to put their money in environmentally friendly companies.

Still, for some NGOs, not enough is being done, and the summit was more of what they had heard before.

“If governments and business are sincere in their commitment to the goals of the Paris Agreement, they would cease their financing of dirty and harmful energy projects around the world and would instead accept their responsibility for providing public finance to address climate change instead of letting business dictate the agenda,” said Meena Raman of Third World Network.

The post Money Talks at One Planet Summit in Paris appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/money-talks-one-planet-summit-paris/feed/ 0
Arming Poor Countries Enriches Rich Countrieshttp://www.ipsnews.net/2017/12/arming-poor-countries-enriches-rich-countries/?utm_source=rss&utm_medium=rss&utm_campaign=arming-poor-countries-enriches-rich-countries http://www.ipsnews.net/2017/12/arming-poor-countries-enriches-rich-countries/#respond Thu, 14 Dec 2017 09:35:42 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=153534 Anis Chowdhury, Adjunct Professor, Western Sydney University and the University of New South Wales; held senior United Nations positions during 2008–2015 in New York and Bangkok. Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Arming Poor Countries Enriches Rich Countries appeared first on Inter Press Service.

]]>

The iconic statue of a knotted gun barrel outside U.N. headquarters. Credit:Tressia Boukhors/IPS.

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY/KUALA LUMPUR , Dec 14 2017 (IPS)

Although the Cold War came to an end over a quarter century ago, international arms sales only declined temporarily at the end of the last century. Instead, the United States under President Trump is extending its arms superiority over the rest of the world.

The five biggest importers were India, Saudi Arabia, the United Arab Emirates (UAE), China and Algeria. Indian arms imports increased by 43 per cent. Its imports during 2012–2016 were far greater than those of its regional rivals, China and Pakistan, as Pakistan’s arms imports declined by 28 per cent compared to 2007–2011. UAE imports increased by 63 per cent while Saudi Arabia’s rose a staggering 212 per cent
Meanwhile, some fast-growing developing countries are now arming themselves much faster than their growth rate. Such expensive arms imports mean less for development and the people, especially the poor and destitute who constitute several hundred million in India alone.

The end of the Cold War in the early 1990s had raised expectations of a ‘peace dividend’. Many hoped and expected the arms race to decelerate, if not cease; the resources thus saved were expected to be redeployed for development and to improve the lives of ordinary people.

But the arms trade has continued to grow in the new millennium, after falling briefly from the mid-1990s. And without the political competition of the Cold War, official development assistance (ODA) to developing countries fell in the 1990s. Such ODA or foreign aid only rose again after 9/11, the brutal terroristic attack on US symbols of global power, only to fall again after the global financial crisis.

 

Arms sales

The Stockholm International Peace Research Institute’s (SIPRI) latest report on the world’s arms trade offers some revealing new data. The volume of international transfers of major weapons in 2012–2016 was 8.4 per cent more than in 2007–2011, the highest for any five-year period since 1990.

As Figure 1 shows, international arms exports rose steeply until the early 1980s, after a brief decline during 1955–1960. It fell once again from the mid-1980s as Mikhail Gorbachev sought to end the Cold War which had diverted resources to military build-ups in developing countries.

Foreign sales of military arms and equipment across the world totalled $374.8 billion in 2016, the first year of growth (by 1.9 per cent), after five years of decline. American companies had a $217.2 billion lion’s share of foreign arms sales. Seven out of ten of the world’s top arms companies were American, earning $152.1 billion, with Lockheed Martin leading with $40.8 billion.

 

Arms Sales: Arming Poor Countries Enriches Rich Countries - Source: SIPRI Arms Transfer Database (20 Feb. 2017) Note: The bars show annual totals while the line shows the five-year moving average, with each data point representing an average for the five-year period ending that year. The SIPRI trend-indicator value (TIV) measures the volume of international transfers of major weapons.

Figure 1. International transfers of major weapons, 1950–2016. Source: SIPRI Arms Transfer Database (20 Feb. 2017) Note: The bars show annual totals while the line shows the five-year moving average, with each data point representing an average for the five-year period ending that year. The SIPRI trend-indicator value (TIV) measures the volume of international transfers of major weapons.

 

Arms exporters

The five biggest exporters during 2012–2016 were the United States, Russia, China, France and Germany (Figure 2).

 

 

Arms Sales: Arming Poor Countries Enriches Rich Countries - Source: SIPRI Arms Transfer Database (20 Feb. 2017)

Source: SIPRI Arms Transfer Database (20 Feb. 2017)

 

US exports of major weapons increased by 21 per cent during 2012–2016 compared to 2007–2011. The major destination was the Middle East which accounted for 47 per cent. The USA exported major weapons to at least 100 states during 2012–2016, significantly more than any other supplying country.

Russian major weapons exports increased by only 4.7 per cent. It sold weapons to only 50 states, with exports to India alone accounting for 38 per cent. Meanwhile, China’s exports increased by 74 per cent, as its share of global arms exports rose from 3.8 to 6.2 per cent. China’s arms exports to Africa grew most, by 122 per cent, to account for 22 per cent of its total arms exports.

 

Arms importers

The five biggest importers were India, Saudi Arabia, the United Arab Emirates (UAE), China and Algeria. Indian arms imports increased by 43 per cent. Its imports during 2012–2016 were far greater than those of its regional rivals, China and Pakistan, as Pakistan’s arms imports declined by 28 per cent compared to 2007–2011. UAE imports increased by 63 per cent while Saudi Arabia’s rose a staggering 212 per cent! Saudi Arabia is the largest buyer of US weapons followed by South Korea.

India, the world’s largest arms importer, has more of the world’s abject poor (280 million) than any other country, accounting for a third of the world’s poor living below the international poverty line of US$1.90 a day. Using a US$3.10 a day poverty line, more appropriate for a middle-income country, the number of poor in India goes up dramatically to 732 million.

A study in 2014, led by the former chairman of the Indian Prime Minister’s Economic Advisory Council, C Rangarajan, estimated that 363 million, or 29.5 per cent of India’s 1.2 billion people, lived in poverty in 2011–2012, i.e., on less than Rs 32 daily in rural areas, and below Rs 47 a day in urban areas.

Asia and Oceania was the main importing region in 2012–2016, accounting for 43 per cent of global imports, followed by the Middle East, with 29 per cent, and African states accounting for 8.1 per cent. Between the two five year periods, arms imports in Asia and Oceania increased by 7.7 per cent and in the Middle East by 86 per cent. Arms imports by European states fell by 36 per cent while African arms imports declined by 6.6 per cent.

Tensions in Southeast Asia have driven up demand for weapons. Viet Nam’s arms imports increased by 202 per cent, pushing it to become the 10th largest arms importer in 2012–2016 from being 29th in 2007–2011. This was the fastest increase among the top ten importers. Philippines’ arms imports increased by 426 per cent while Indonesia’s grew by 70 per cent.

 

Fuelling conflicts

Six rebel groups are among the 165 identified recipients of major weapons in 2012–2016. Even though deliveries to the six accounted for no more than 0.02 per cent of major arms transfers, SIPRI argues the sales fuel conflicts.

Conflict regions alone accounted for 48 per cent of total arms imports to sub-Saharan Africa. According to SIPRI, governments fighting rebel groups used major arms against anti-government rebels.

The post Arming Poor Countries Enriches Rich Countries appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/arming-poor-countries-enriches-rich-countries/feed/ 0
Central America Builds Interconnected Clean Energy Corridorhttp://www.ipsnews.net/2017/12/central-america-builds-interconnected-clean-energy-corridor/?utm_source=rss&utm_medium=rss&utm_campaign=central-america-builds-interconnected-clean-energy-corridor http://www.ipsnews.net/2017/12/central-america-builds-interconnected-clean-energy-corridor/#respond Tue, 12 Dec 2017 21:30:57 +0000 Edgardo Ayala http://www.ipsnews.net/?p=153505 Countries in Central America are working to strengthen their regional electricity infrastructure to boost their exchange of electricity generated from renewable sources, which are cheaper and more environmentally friendly. With the Clean Energy Corridor, a project agreed in 2015 by the governments of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, these countries seek […]

The post Central America Builds Interconnected Clean Energy Corridor appeared first on Inter Press Service.

]]>
Workers at an electricity distribution company carry out maintenance work on the grid, on the outskirts of San Salvador. Central American countries, including El Salvador, are promoting an interconnected Clean Energy Corridor. Credit: Edgardo Ayala / IPS

Workers at an electricity distribution company carry out maintenance work on the grid, on the outskirts of San Salvador. Central American countries, including El Salvador, are promoting an interconnected Clean Energy Corridor. Credit: Edgardo Ayala / IPS

By Edgardo Ayala
SAN SALVADOR , Dec 12 2017 (IPS)

Countries in Central America are working to strengthen their regional electricity infrastructure to boost their exchange of electricity generated from renewable sources, which are cheaper and more environmentally friendly.

With the Clean Energy Corridor, a project agreed in 2015 by the governments of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, these countries seek to share their surplus electricity from renewable sources, including non-conventional sources, such as wind, geothermal and solar.

To achieve this they will have to gradually modify their energy mixes to depend less and less on thermal power, which is more expensive and has more negative impacts on the planet, since it is based on the burning of fossil fuels."The problem is the stability of the sources. The State can have a 60-MW photovoltaic plant, but if there is variability, it must have a backup in thermal, hydroelectric or other sources allowing it to meet the needs of the market.” -- Werner Vargas

The objective is to inject cleaner energy into the system that interconnects the electricity grids of the countries of the region, with economic and environmental benefits, experts and regional authorities told IPS.

“Each country is doing everything possible to generate energy with clean sources…and if there is surplus energy that is not consumed, it is illogical for it not to be used by other countries that are using thermal power: that’s where the Clean Energy Corridor comes into the picture,” Fernando Díaz, director of electricity at Panama’s Energy Ministry, told IPS.

About 60 percent of electricity in the region is produced from renewable sources, mostly hydroelectric plants.

But Central America is still highly dependent on fossil fuels, says a report by the International Renewable Energy Agency (IRENA).

This organisation, based in the United Arab Emirates, promotes the development of renewable energies in the world, and is the main driver of the Corridor project in Central America, following similar efforts in Africa and Southeast Asia.

The Corridor will use a platform already functioning in Central America: a 1,800-km power grid cutting across the isthmus, from Guatemala in the extreme northwest, to Panama in the southeast.

The grid was built to give life to the Regional Electricity Market, created in May 2000, as part of the Central American Integration System (SICA), a mechanism of political and economic complementation established by the presidents of the area in December 1991.

Over 50 percent of the energy traded is supplied by hydroelectric plants, 35 percent by thermal and 15 percent by geothermal, solar and wind, explained René González of Nicaragua, executive director of the Regional Operator Entity (EOR), which administers electricity sales.

It is estimated, he added in a dialogue with IPS in San Salvador, that the proportion of non-conventional renewables could grow to up to 20 percent by 2020.

The Providencia Solar company inaugurated this year the first photovoltaic power plant in El Salvador, in the central department of La Paz. With 320,000 solar panels, it is one of the largest solar installations in Central America, whose countries are making efforts to transition their energy mixes to renewable sources. Credit: Edgardo Ayala / IPS

The Providencia Solar company inaugurated this year the first photovoltaic power plant in El Salvador, in the central department of La Paz. With 320,000 solar panels, it is one of the largest solar installations in Central America, whose countries are making efforts to transition their energy mixes to renewable sources. Credit: Edgardo Ayala / IPS

The countries of the area as a whole will need an additional seven gigawatts that year, on top of the current level of production, according to a report published in July by IRENA.

The Corridor is in line with the goals set out in the Central American Sustainable Energy Strategy 2020, agreed by the governments of the region in 2007, which aims to overcome the dependence on fossil fuels and promote renewable sources, Werner Vargas, the executive director of the SICA General Secretariat, told IPS.

“The idea (of the Corridor) is to inject clean energies into the Central American electricity system, but guaranteeing that there is not too much variability,” explained Vargas, at the Secretariat’s headquarters in San Salvador.

Part of the challenge is to operate a system with higher flows of renewable electricity, which is more unstable, as is the case with solar and wind sources, which depend on climate variability.

“The problem is the stability of the sources. The State can have a 60-MW photovoltaic plant, but if there is variability, it must have a backup in thermal, hydroelectric or other sources allowing it to meet the needs of the market, ” added Vargas, who is also from Nicaragua.

The governments of Central America must also develop the necessary regulatory frameworks to adapt the technical processes and purchase and sale of energy from mainly renewable sources.

If national power grids are fed with clean sources, and surpluses reach the regional network, Central American consumers will be able to have cheaper electricity.

“The cost of electricity production is about 70 percent of its total cost, so if you want to reduce the cost of supply to the final consumer you have to reduce the cost of production,” said the EOR’s González.

He added that the corridor would affect production costs, and the regional market is a way to achieve that goal, since it can inject cheaper energy produced in other regions.

In the same vein, “the vision we have in Central and Latin America is to move towards renewable energies, towards corridors, and that is why interregional connections are important,” said Díaz, from Panama’s Energy Ministry.

He mentioned the case of the project of interconnection between Panama and Colombia, which would link the electricity market of that South American country not only with Panama, but by extension with all of Central America, while linking Central America with different parts of South America.

“This way we will have the capacity to capture solar power from the Atacama Desert, in Chile, hydropower from Brazil, and wind power from Uruguay; these are the things we are seeing as a region,” Díaz said.

Another economic benefit derived from greater energy integration in Central America is that the region is more attractive to international investors, seeing it as a bloc, rather than separate countries.

“It is more attractive to invest in larger projects than individually, that is another fundamental reason for the project: it generates conditions to attract investment,” said the EOR’s González.

But despite the economic and environmental advantages of further development of renewable energy sources, some environmentalists argue that the issue is being viewed too much from a technical and economic perspective, without considering some social costs that these projects may entail.

“There are projects where solar collectors are used on large extensions of land that could be devoted to agriculture or used to build houses…it seems that there is only interest in energy and making money quickly,” said Ricardo Navarro, director of the Salvadoran Centre for Appropriate Technology.

Navarro, who is also head of the Salvadoran branch of Friends of the Earth International, told IPS that it is important for the planet to seek to increase the use of renewable energies, but with that same emphasis the governments of the area should engage in energy saving policies.

“How about trying to reduce demand? For example, a tree prevents the sun beating down directly on a building, and thereby reduces the demand for air conditioning; there are also ways to cook food with less electricity,” he said.

The post Central America Builds Interconnected Clean Energy Corridor appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/central-america-builds-interconnected-clean-energy-corridor/feed/ 0
WTO Ministerial Conference – Rejuvenating free tradehttp://www.ipsnews.net/2017/12/wto-ministerial-conference-rejuvenating-free-trade/?utm_source=rss&utm_medium=rss&utm_campaign=wto-ministerial-conference-rejuvenating-free-trade http://www.ipsnews.net/2017/12/wto-ministerial-conference-rejuvenating-free-trade/#respond Thu, 07 Dec 2017 16:32:20 +0000 Abdullah Shibli http://www.ipsnews.net/?p=153441 The Eleventh Ministerial Conference (MC11) of the World Trade Organization will be held on December 10-13 in Buenos Aires, Argentina. The meeting of this highest decision-making body of the WTO, which meets at least once every two years, is taking place at a critical moment of the free trade movement. WTO and free trade are […]

The post WTO Ministerial Conference – Rejuvenating free trade appeared first on Inter Press Service.

]]>
By Abdullah Shibli
Dec 7 2017 (The Daily Star, Bangladesh)

The Eleventh Ministerial Conference (MC11) of the World Trade Organization will be held on December 10-13 in Buenos Aires, Argentina. The meeting of this highest decision-making body of the WTO, which meets at least once every two years, is taking place at a critical moment of the free trade movement. WTO and free trade are threatened by the emergence of protectionist and anti-trade sentiments amongst many of the organisation’s 164 members, and squabbling among the world’s largest traders, including the USA, China, and even the generally free-trade oriented European Union. If countries lower the tariff rates against imports and refrain from imposing non-tariff barriers against trade, it benefits free trade and promotes growth.

The upcoming ministerial-level meeting of WTO comes at a time when trade, and the future of trade, is at a crossroads. Credit: RUBEN SPRICHREUTERS

However, in recent years since 2010, we have witnessed a slowdown in the growth of world trade, and it is predicted that in the current environment the “new normal” is a modest growth as compared with the rapid expansion of trade relations during 1990-2010. The most ominous trend seems to be that many free trade agreements of the last decade including NAFTA and TPP are now under siege.

WTO was set up in 1995 under the Marrakesh Agreement and regulates international trade in goods, services, and intellectual property between participating countries “by providing a framework for negotiating trade agreements and dispute resolution.” Unfortunately, the key mission of WTO—to lower tariffs and facilitate increased global trade—suffered a major setback with the collapse of the Doha Round, whose objective was to lower trade barriers around the world, and thus facilitate increased global trade.

The last ministerial conference of WTO took place in December 2015. To stay relevant, the next conference needs to address five issues: (1) trade in non-agricultural goods, (2) trade in services; (3) e-commerce; (4) improved rules on distortions regarding state-owned enterprises (SOE), local content requirements (ROO) and export restrictions; and (5) investment. Obviously, it would be too much to expect that MC11 will address all these issues in four days, but the trade ministers and senior officials attending the conference must make a commitment to move forward with them. For developing countries, trade is their “engine of growth.”

In the last few years, globalisation and trade liberalisation have been buzzwords at international forums and the media. However, some statistics have shown that decline in trade volume took a downturn in the early 1990s. According to IMF data, the global trade elasticity peaked in 1991-1995, much before the recent financial crisis, and has been declining since then. Trade Elasticity (TE) refers to the ratio of trade growth to GDP growth rates. TE was 1 during 1981-1985, meaning that trade grew at the same rate as GDP, and started to climb, reaching a level over 2.5 during 1991-2000. As mentioned, trade growth has not been robust in recent years and is hovering below 1.5 as this decade winds down.

Many factors have contributed to this slowdown; the ones that readily come to mind are protectionist measures taken by all countries since the financial crisis in 2009, and backpedalling on trade reforms. Even voters in major western countries are turning their backs on globalisation as evidenced by recent electoral results in the USA, UK, and Germany. According to a Wall Street Journal-NBC polls conducted in the US, just 31 percent of GOP respondents in December 1999 said free trade deals hurt the US. “By February 2017, when the question was posed slightly differently, a majority of GOP voters polled said free trade hurt the country.”

Joseph Stiglitz, Nobel laureate in economics, attributes this resurgence in protectionism to the failure of governments to protect workers and vulnerable population who equate trade with job losses.

How can WTO help reverse the trend described above? First of all, the meeting of MC needs to address the anti-trade sentiment. Retraining of workers and employment generation must work hand in hand with lower tariffs. Member-countries must also check their impulses to look for quick fixes to correct trade deficits as the USA is doing. “Nearly all WTO members engage to one degree or another in backsliding, sometimes through the use of legal but restrictive measures (e.g. raising tariffs up to the bound rate or employing the trade-remedy laws) and sometimes imposing measures that are found to violate their WTO commitments.”

The upcoming ministerial-level meeting comes at a time when trade, and the future of trade, is at a crossroads. Many in the international business community have voiced their concern, to cite an example, against “European Commission (EC) proposals to adopt new rules for taxing the digital economy within the single market, which would essentially create new tax barriers and ultimately undermine global efforts to establish a consistent international tax landscape.” From mid-October 2016 to mid-May 2017, WTO members implemented 74 new trade-restrictive measures, amounting to an average of almost 11 new measures per month.

WTO needs to recognise the concerns of developing countries particularly their micro-, small- and medium-sized enterprises (MSMEs). “Despite their economic importance in developed, developing and least-developed countries, MSMEs’ share of trade is disproportionately small, often because they are unaware of the potentially wider market and because they traditionally have not had the resources to navigate sometimes complex trading procedures. But new technologies are helping to pare back these obstacles and create a more level playing field for smaller companies in international trade. Helping more MSMEs to trade internationally is an important step in building a more inclusive trading system that benefits a wider array of citizens.”

Recently IMF, WTO and the World Bank came out with a policy document entitled, “Making Trade an Engine of Growth for All: The Case for Trade and For Policies to Facilitate Adjustment” with a clarion call for liberalisation and better rules. The role of trade as a driver of growth is threatened, according to the report, which called for action to better communicate the benefits of open trade to a public that may have become more sceptical, especially in advanced economies.

Dr Abdullah Shibli is an economist and Senior Research Fellow at the International Sustainable Development Institute (ISDI), a think-tank based in Boston, USA.

This story was originally published by The Daily Star, Bangladesh

The post WTO Ministerial Conference – Rejuvenating free trade appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/wto-ministerial-conference-rejuvenating-free-trade/feed/ 0
Strengthening Governments to Cope with PPPshttp://www.ipsnews.net/2017/12/strengthening-governments-cope-ppps/?utm_source=rss&utm_medium=rss&utm_campaign=strengthening-governments-cope-ppps http://www.ipsnews.net/2017/12/strengthening-governments-cope-ppps/#respond Tue, 05 Dec 2017 16:47:13 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=153334 Public-private partnerships (PPPs) have emerged in recent years as the development ‘flavour of the decade’ in place of aspects of the old Washington Consensus. Instead of replacing the role of government or consigning it to the garbage bin of history, corporations are increasingly using governments to advance their own interests through PPPs. On the one […]

The post Strengthening Governments to Cope with PPPs appeared first on Inter Press Service.

]]>
Through public-private partnerships (PPPs) corporations are increasingly using governments to advance their own interests. Credit: IPS

Through public-private partnerships (PPPs) corporations are increasingly using governments to advance their own interests. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Dec 5 2017 (IPS)

Public-private partnerships (PPPs) have emerged in recent years as the development ‘flavour of the decade’ in place of aspects of the old Washington Consensus. Instead of replacing the role of government or consigning it to the garbage bin of history, corporations are increasingly using governments to advance their own interests through PPPs.

On the one hand, in a contemporary variant of previously condemned ‘tied aid’, developed country governments have been persuaded to use their aid or overseas development assistance (ODA) budgets to promote their own national – read corporate – interests, e.g., by providing ‘blended finance’ on concessional terms to secure PPP contracts, or to otherwise advance the interests of such businesses.

On the other hand, aid-recipient governments have been encouraged to replace government procurement with PPP arrangements to undertake infrastructure and other projects despite the mixed records of PPPs, not least in developed countries themselves.

 

Improving PPPs

Hence, many developing countries have little choice but to deal with the active promotion of PPPs. Thus, to secure financing for needed infrastructure, they need strong institutional capacity to create, manage and evaluate PPPs.

When presented with PPP proposals, governments need to have the capacity to critically evaluate these proposals and to make counter proposals when needed. It is therefore important for government institutional capacity to be enhanced to create, manage and evaluate PPP proposals.

Governments should be empowered, and thus discouraged from presuming that they have no choice but to accept PPP proposals from the private sector. Most developing country governments cannot dodge the PPP bullet and need to be able to better deal with the challenge.

 

Strengthening institutional capacity

Strong institutional capacity to better cope with PPPs requires having a dedicated competent service loyal to the government and public priorities and concerns in order to do as needed.

Responsible and accountable developed and developing country governments must work together to ensure that they are all better able to cope with this growing trend of state-sponsorship of private corporate expansion, mainly by the North.
But most low-income and many-middle income developing countries do not have the capacity, let alone the capabilities needed to be able to effectively evaluate and respond to such proposals. Hence, most developing countries need international technical support for the necessary accelerated capacity-building.

Using private consultants to fill the gap in the interim before national capacities are sufficiently developed can be attractive in the short term, but it is often forgotten that most such consultants tend to be mainly oriented to serving ‘better paymasters’ from the private sector.

Hence, strengthening public sector capacities to cope with PPP proposals is both essebtial and urgent. This is not a major problem in some emerging market economies, which generally have more choice in such matters, but it is for many poorer developing countries.

Overseas development assistance (ODA) should, therefore, enable public sector capacity building, rather than give governments little choice. Instead of helping countries develop such capacities, much ODA often gives developing country governments little choice but to accept some PPP proposal touted as superior.

Collective action

As many governments may not be able to develop such a centralized capacity and mechanism with the capacity and ability to deal with very varied PPP proposals, one alternative is for them to work together to develop some kind of shared capacity.

But relying on organizations committed to PPPs, such as multilateral development banks (MDBs) or international financial institutions (IFIs), raises different problems. So far, they have largely failed to credibly provide such capacities and mechanisms.

They have also not enabled cooperation among developing countries to better cope with the PPP challenge, partly due to their current inclination to promote and enable PPPs as directed by their major shareholders.


Alternatives

Hence, there is an urgent need to consider and develop alternative arrangements. Government procurement, with sovereign debt, if necessary, has been found to be generally much cheaper, contrary to the misleading claims of PPP advocates.

Ensuring transparent competition among prospective PPP proposals would also help. Many PPP proposals have been approved and implemented without any real or meaningful transparency or competition despite a great deal of pious rhetoric by donor governments, IFIs and MDBs about the importance of and need for competition and transparency.

There are many contemporary examples that clearly suggest that the public interest would be well served by more transparent bidding. Also, it is important to make sure that PPPs are not abused, with the government or public sector, and ultimately, the public bearing the costs or taking the bulk of the risks, while rents or profits mainly accrue to the private partner.

 

Multilateral guidelines

Internationally agreed guidelines would also help. International guidelines for PPPs need to be developed multilaterally through an inclusive multi-stakeholder process, perhaps through the United Nations Financing for the Development process. Alternatively, UNCTAD in Geneva is well placed to work towards such guidelines which would go some way to leveling the playing field.

Such guidelines should endeavor to enhance developing countries’ bargaining and negotiating positions, e.g., by ensuring competition through open bidding. Such guidelines should also seek to avoid abuse of PPPs, including by ensuring that public money is not used to subsidize private risk and rents.

Responsible and accountable developed and developing country governments must work together to ensure that they are all better able to cope with this growing trend of state-sponsorship of private corporate expansion, mainly by the North.

The post Strengthening Governments to Cope with PPPs appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/strengthening-governments-cope-ppps/feed/ 0
South-South Cooperation Key to a New Multilateralismhttp://www.ipsnews.net/2017/12/south-south-cooperation-key-new-multilateralism/?utm_source=rss&utm_medium=rss&utm_campaign=south-south-cooperation-key-new-multilateralism http://www.ipsnews.net/2017/12/south-south-cooperation-key-new-multilateralism/#respond Mon, 04 Dec 2017 14:36:16 +0000 Baher Kamal http://www.ipsnews.net/?p=153298 “There are new challenges to all states: among them, the real threat to multilateralism… South-South and triangular cooperation can contribute to a new multilateralism and drive the revitalisation of the global partnership for sustainable development.” This is how Liu Zhenmin, the UN under-secretary general for Economic and Social Affairs, underscored the importance of South-South Cooperation […]

The post South-South Cooperation Key to a New Multilateralism appeared first on Inter Press Service.

]]>

Mongolian farmers harvest carrots as part of an FAO South-South Cooperation Programme between China and Mongolia. Credit: FAO

By Baher Kamal
ROME, Dec 4 2017 (IPS)

“There are new challenges to all states: among them, the real threat to multilateralism… South-South and triangular cooperation can contribute to a new multilateralism and drive the revitalisation of the global partnership for sustainable development.”

This is how Liu Zhenmin, the UN under-secretary general for Economic and Social Affairs, underscored the importance of South-South Cooperation at an event marking the United Nations Day for South-South Cooperation on 12 September, just few weeks ahead of the Global South-South Development Expo 2017 in Antalya, Turkey (27 to 30 November).

The statement came a few weeks ahead of US President Donald Trump’s announcement that his country was revoking its commitment to the September 2016 UN-promoted global pact that aims at guaranteeing the human rights of migrants and refugees worldwide, in what is widely considered as his third blow to multilateralism in less than one year since he took office after US withdrawal from both the Paris Climate Agreement and UNESCO.

Solutions and strategies created in the South are delivering lasting results around the world, said Amina Mohammed, the UN deputy secretary-general, on the occasion of the United Nations Day for South-South Cooperation.

“Nearly every country in the global South is engaged in South-South cooperation,” she added, citing China’s Belt and Road Initiative, India’s concessional line of credit to Africa, the Asian Infrastructure Investment Bank, and the Strategic Association Agreement by Mexico and Chile as few examples.

The deputy UN chief, however, also cautioned that progress has been uneven and extreme poverty, deep inequality, unemployment, malnutrition and vulnerability to climate and weather-related shocks persist, and underscored the potential of South-South cooperation to tackle these challenges.

Not a Substitute for North-South Cooperation

Significantly, Amina Mohammed highlighted that the support of the North is crucial to advance sustainable development.

“South-South cooperation should not be seen as a substitute for North-South cooperation but as complementary, and we invite all countries and organizations to engage in supporting triangular cooperation initiatives,” she said, urging all developed nations to fulfil their Official Development Assistance (ODA) commitments.

A Kenya delegation discuss with Indonesia goverment official about food security in their country. Credit: FAO

She also urged strengthened collaboration to support the increasing momentum of South-South cooperation as the world implements the 2030 Agenda for Sustainable Development and the 2015 Paris Agreement on Climate Change.

Further, noting the importance of the upcoming high-level UN Conference on South-South Cooperation to be hosted by Argentina on 20-22 March 2019, she said, “It will enable us to coordinate our South-South efforts, build bridges, cement partnerships, and establish sustainable strategies for scaling up impact together.”

The UN General Assembly decided to observe this Day on 12 September annually, commemorating the adoption in 1978 of the Buenos Aires Plan of Action for Promoting and Implementing Technical Cooperation among Developing Countries.

Key to Overcoming Inequalities

At the opening of the Global South-South Development Expo 2017 in Antalya, Turkey, Fekitamoeloa Katoa Utoikamanu, the UN High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), on 27 November said that as the most vulnerable countries continue to face serious development challenges, South-South cooperation offers “enormous opportunities and potential” to effectively support them in accelerating progress on implementing globally agreed goals.

“These are all countries faced with complex and unique development challenges which lend themselves to exploring how and where we can maximize South-South cooperation and leverage global partnerships to support countries’ efforts toward sustainable and inclusive futures,” said Utoikamanu.

The 2017 Global Expo gathered 800 participants from 120 countries, senior UN officials, government ministers, national development agency directors, and civil society representatives, to share innovative local solutions and push for scaling up concrete initiatives from the global South to achieve the 2030 Agenda and its 17 Sustainable Development Goals (SDGs).

“The central promise of the 2030 Agenda is to ‘leave no-one behind,’ and thus is about addressing poverty, reducing inequality and building a sustainable future of shared prosperity,” she explained. “But it is already clear that these noble Goals will be elusive if the 91 countries my Office is a voice for remain at the bottom of the development ladder.”

As such, she added, South-South collaboration has led to increasing trade between and with emerging economies, investors, providers of development cooperation and sources of technological innovations and know-how. “This trend is confirmed by trade preferences for [least developed country products], enhanced trade finance opportunities, but also innovative infrastructure finance emerging.”

“The complex and pressing challenges the vulnerable countries experience demand that we further strengthen and leverage South-South cooperation,” said Utoikamanu, adding that South-South cooperation is “not an ‘either-or’ – it is a strategic and complementary means of action for the transfer and dissemination of technologies and innovations. It complements North-South cooperation.”

Science, Technology, Innovation

The Antalya week-long Global South-South Development Expo 2017 focused on a number of key issues, including how to transfer science, technology and innovation among developing countries and, in general, on solutions ‘for the South, by the South.’

The future will be determined by the abilities to leverage science, technology and innovation for sustainable growth, structural transformation and inclusive human and social development, said Utoikamanu. “It is proven that innovative technologies developed in the South often respond in more sustainable ways to the contextual needs of developing countries. Last, but not least, this is a question of cost.”

In all this, the Technology Bank for the Least Developed Countries has a major role to play in boosting science, technology and innovation capacity. “It must facilitate technology transfer and promote the integration of [least developed countries] into the global knowledge-based economy.”

Hosted by the Government of Turkey and coordinated by the UN Office for South-South Cooperation (UNOSSC), the Antalya Global South-South Development Expo 2017’ was wrapped up on 30 November under the theme “South-South Cooperation in the Era of Economic, Social and Environmental Transformation: The Road to the 40th Anniversary of the Adoption of the Buenos Aires Plan of Action.”

Jorge Chediek, the Director of UNOSSC, said: “Many of the achievements of the expo are not reflected in these very impressive numbers themselves, they are reflected in the partnerships that are being established, in institutional friendships and agreements that are been developed and that will certainly generate results.”


UN Day for South South Cooperation. Credit: United Nations

The post South-South Cooperation Key to a New Multilateralism appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/12/south-south-cooperation-key-new-multilateralism/feed/ 0
Beware Public Private Partnershipshttp://www.ipsnews.net/2017/11/beware-public-private-partnerships/?utm_source=rss&utm_medium=rss&utm_campaign=beware-public-private-partnerships http://www.ipsnews.net/2017/11/beware-public-private-partnerships/#comments Tue, 28 Nov 2017 17:54:10 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=153228 Public-private partnerships (PPPs) are essentially long-term contracts, underwritten by government guarantees, with which the private sector builds (and sometimes runs) major infrastructure projects or services traditionally provided by the state, such as hospitals, schools, roads, railways, water, sanitation and energy. Embracing PPPs PPPs are promoted by many OECD governments, and some multilateral development banks – […]

The post Beware Public Private Partnerships appeared first on Inter Press Service.

]]>

Since the late 1990s, many countries have embraced Public-Private Partnerships for areas ranging from healthcare and education to transport and infrastructure as a solution to persistent underdevelopment. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Nov 28 2017 (IPS)

Public-private partnerships (PPPs) are essentially long-term contracts, underwritten by government guarantees, with which the private sector builds (and sometimes runs) major infrastructure projects or services traditionally provided by the state, such as hospitals, schools, roads, railways, water, sanitation and energy.

Embracing PPPs
PPPs are promoted by many OECD governments, and some multilateral development banks – especially the World Bank – as the solution to the shortfall in financing needed to achieve development including the Sustainable Development Goals (SDGs).

Since the late 1990s, many countries have embraced PPPs for areas ranging from healthcare and education to transport and infrastructure with problematic consequences. They were less common in developing countries, but that is changing rapidly, with many countries in Asia, Latin America and Africa now passing enabling legislation and initiating PPP projects.

Nevertheless, experiences with PPPs have been largely, although not exclusively negative, and very few PPPs have delivered results in the public interest. However, the recent period has seen tremendous enthusiasm for PPPs.

Financing PPPs
Undoubtedly, there has been some success with infrastructure PPPs, but these appear to have been due to the financing arrangements. Generally, PPPs for social services, e.g., for hospitals and schools, have much poorer records compared to some infrastructure projects.

One can have good financing arrangements, e.g., due to low interest rates, for a bad PPP project. All over the world, private finance still accounts for a small share of infrastructure financing. However, concessional financing arrangements cannot save a poor project although they may reduce its financial burden.

PPPs often involve public financing for developing countries to ‘sweeten’ the bid from an influential private company from the country concerned. ‘Blended finance’, export financing, and new aid arrangements have become means for governments to support their corporations’ bids for PPP contracts abroad, especially in developing countries. Such business support arrangements are increasingly passed off and counted as overseas development assistance (ODA).

Undermining rights
PPPs often increase fees or charges for users of services. PPP contracts often undermine consumer, citizen and human rights, and the state’s obligation to regulate in the public interest. PPPs can limit government capacity to enact new policies – e.g., strengthened environmental or social regulations – that might affect certain projects.

PPPs are now an increasingly popular way to finance ‘mega-infrastructure projects’, but dams, highways, large-scale plantations, pipelines, and energy or transport infrastructure can ruin habitats, displace communities and devastate natural resources. PPPs have also led to forced displacement, repression and other abuses of local communities and indigenous peoples.

There are also growing numbers of ‘dirty’ energy PPPs, exacerbating environmental destruction, undermining progressive environmental conservation efforts and worsening climate change. Typically, social and environmental legislation is weakened to create attractive business environments for PPPs.

PPPs often expensive, risky
In many cases, PPPs are the most expensive financing option, and hardly cost-effective compared to good government procurement. They cost governments – and citizens – significantly more in the long run than if the projects had been directly financed with government borrowing.

It is important to establish the circumstances required to make efficiency gains, and to recognize the longer term fiscal implications due to PPP-related ‘contingent liabilities’. Shifting public debt to government guaranteed debt does not really reduce government debt liabilities, but obscures accountability as it is taken ‘off-budget’ and no longer subject to parliamentary, let alone public scrutiny.

Hence, PPPs are attractive because they can be hidden ‘off balance sheet’ so they do not show up in budget and government debt figures, giving the illusion of ‘free money’. Hence, despite claims to the contrary, PPPs are often riskier for governments than for the private companies involved, as the government may be required to step in to assume costs if things go wrong.

Marginalizing public interest
Undoubtedly, PPP contracts are typically complex. Negotiations are subject to commercial confidentiality, making it hard for parliamentarians, let alone civil society, to scrutinize them. This lack of transparency significantly increases the likelihood of corruption and undermines democratic accountability.

PPPs also undermine democracy and national sovereignty as contracts tend to be opaque and subject to unaccountable international adjudication due to investor-state dispute settlement (ISDS) commitments rather than national or international courts. Under World Bank-proposed PPP contracts, national governments can even be liable for losses due to strikes by workers.

Thus, PPPs tend to exacerbate inequality by enriching the wealthy who invest in and profit from PPP projects, thus accumulating even more wealth at the expense of others, especially the poor and the vulnerable. The more governments pay to private firms, the less they can spend on essential social services, such as universal social protection and healthcare. Hence, PPP experiences suggest not only higher financial costs, but also modest efficiency gains.

Government procurement viable
One alternative, of course, is government or public procurement. Generally, PPPs are much more expensive than government procurement despite government subsidized credit. With a competent government doing good work, government procurement can be efficient and low cost.

Yet, international trade and investment agreements are eroding the rights of governments to pursue such alternatives in the national interest. With a competent government and an incorruptible civil service or competent accountable consultants doing good work, efficient government procurement has generally proved far more cost-effective than PPP alternatives. It is therefore important to establish under what circumstances one can achieve gains and when these are unlikely.

The post Beware Public Private Partnerships appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/beware-public-private-partnerships/feed/ 1
Uncertain Future for “Diabolic” Free Trade Pacts Between EU and Africahttp://www.ipsnews.net/2017/11/uncertain-future-diabolic-free-trade-pacts-eu-africa/?utm_source=rss&utm_medium=rss&utm_campaign=uncertain-future-diabolic-free-trade-pacts-eu-africa http://www.ipsnews.net/2017/11/uncertain-future-diabolic-free-trade-pacts-eu-africa/#respond Mon, 27 Nov 2017 00:00:55 +0000 Daan Bauwens http://www.ipsnews.net/?p=153207 In the run-up to the fifth EU-Africa summit in Côte d’Ivoire, the future of the Economic Partnership Agreements (EPAs) between Europe and its former colonies looks bleaker than ever. While most of Europe’s trade partners around the world keep refusing to sign the deals, the African Union’s Commissioner for Trade will most likely announce a […]

The post Uncertain Future for “Diabolic” Free Trade Pacts Between EU and Africa appeared first on Inter Press Service.

]]>
Adolf Ozor, a tomato farmer in the Greater Accra Region of Ghana, is struggling to make ends meet after import surges. Credit: Daan Bauwens/IPS

Adolf Ozor, a tomato farmer in the Greater Accra Region of Ghana, is struggling to make ends meet after import surges. Credit: Daan Bauwens/IPS

By Daan Bauwens
BRUSSELS, Nov 27 2017 (IPS)

In the run-up to the fifth EU-Africa summit in Côte d’Ivoire, the future of the Economic Partnership Agreements (EPAs) between Europe and its former colonies looks bleaker than ever. While most of Europe’s trade partners around the world keep refusing to sign the deals, the African Union’s Commissioner for Trade will most likely announce a moratorium on all EPAs.

Ever since independence, Europe’s former colonies have enjoyed preferential (duty-free) access to the European market. In turn they didn’t need to open their own markets. When in 2000 the World Trade Organization deemed this one-sided market opening unlawful, Europe and 79 countries in Africa, the Caribbean and the Pacific (ACP) started negotiating reciprocal trade deals."Trade between neighbors is now more difficult than trade with the EU. We are creating borders within Africa." --Gunther Nooke

The resulting deals, coined Economic Partnership Agreements or EPAs, are not pure free trade deals. Under the agreements, ACP countries are allowed to keep protecting 20 percent of their products – mostly agricultural products – with import tariffs. The other 80 percent will be liberalized gradually over the course of 20 years after the signing and ratification of the deal. The deals were negotiated between the European Commission and seven regions of several countries engaged in economic integration processes.

Stalling the implementation

Seventeen years later only two of the seven negotiated deals have been signed, ratified and implemented, one with the South African Development Community (Botswana, Lesotho, Namibia, South Africa and Swaziland) and one with the Caribbean. The EPA with West Africa is currently blocked by Nigeria, Gambia and Mauritania who refuse to sign, while in the East African region, last year Tanzania sued Kenya for signing while Uganda wants to address more concerns – President Museveni travelled to Brussels on a three-day work visit at the end of September for talks.

Almost all ACP countries fear the possible negative impact of the EPAs on their economies and therefore stall its implementation. “They already had the right to export to Europe duty-free,” said Joyce Naar, a lawyer and activist with the ACP Civil Society Forum. “Now they are expected to open up their markets to Europe without getting anything back.”

Especially in Africa, governments and analysts fear an encore of the tomato and chicken scenario. In Ghana, for instance, after IMF and World Bank-enforced tariff reductions, import surges caused the market share for domestic chicken to fall from 100 percent to a mere three percent today in less than three decades. The chicken industry, once the second largest employer in the country, has now been taken over by competing imports from Canada, Brazil, Europe and China.

As for tomatoes, after lowering tariffs Ghana became the second largest importer of tomatoes in the world and according to FAO data, market share for domestic produce dwindled from 92 to 57 percent in only five years.

Industrialization at risk

Aside from agricultural produce, NGOs also fear that entire industrialization of the continent is at risk. At a recent international trade union conference on the issue of EPAs in Togo, this point was repeatedly made. “To industrialize, we need to protect and develop the internal market until we’re ready for international competition, as has been demonstrated by China,” says Georgios Altintzis of he International Trade Union Confederation (ETUC).

At the conference, Mariama Williams, senior program officer at the South Center in Geneva, also stressed that increased competition would lead to increasing feminization of work.

“Women do the worst jobs in the worst conditions,” she stated at the conference. According to Williams, EPAs will have the greatest impact on labour-intensive industries where women are disproportionately employed. An increase of competition would raise the pressure on these sectors while the internal standards and labour conditions remain unchanged.

“Diabolic” agreements or success story?

“There has always been a diabolic whiff about EPAs,” former EPA chief negotiator Sandra Gallina said a few weeks ago at a meeting of trade ministers from all ACP countries in Brussels. “There is nothing diabolic about them, they were just extremely badly communicated. For the last five years I have been fighting a misinformation campaign.”

On the first day of the Brussels meeting, the European Commission published numbers on its website meant to illustrate the benefits of EPAs. In 2012 an agreement entered into force between Madagascar and the EU. By 2016, exports to the EU had risen by 65 percent. The same for South Africa, which signed an agreement one year ago. The last year, exports of processed fish increased by 16 percent and flowers by 20 percent.

According to Marc Maes, trade policy officer at the Flemish North South Movement 11.11.11, the figures should be taken with a grain of salt. “Madagascar is recovering from a period of total chaos,” he said. “Do these numbers show the influence of the EPA or mere economic recovery? In the case of South Africa, the mentioned period consists of just one year. It’s a bit premature to talk about a steady, reliable impact.”

Migration crisis

The criticism isn’t limited to the content of the agreements. The way in which the European Commission concludes them is also widely condemned. As agreements with entire regions are stalled, the Commission now makes agreements with individual states. Ghana and Côte d’Ivoire signed and ratified such interim EPAs a year ago, fearing they would lose preferential access to the European market.

“That’s crazy,” says Gunther Nooke, personal representative in Africa of German Chancellor Angela Merkel and one of the staunchest critics of the EPAs. “Trade between neighbors is now more difficult than trade with the EU. We are creating borders within Africa. ”

According to Nooke, in the midst of a migration crisis the only things that benefits Europe and Africa is more employment in Africa. “This can only be done by protecting the entire African market with the creation of an African Customs Union led by the African Union. African products can be made here and be freely traded across the continent without having to compete with European goods. But now, because of differences in opinion about EPAs, African countries aren’t making any progress in forming a customs union.”

Moratorium

According to Merkel’s envoy, the African Union Commissioner for Trade has already announced that he will call for a moratorium on all EPAs. “And we must respect that,” says the advisor.

Germany is in the perfect position to make its opinion be heard. The country delivers the greatest contribution to the European Development Budget: just over 6.2 billion euros in the period 2014-2020, accounting for 20.6 percent of the total. It is doubtful whether Berlin and Brussels will be able to voice their opinions in unison at the Nov. 28-29 EU-Africa Summit in Abidjan.

The post Uncertain Future for “Diabolic” Free Trade Pacts Between EU and Africa appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/uncertain-future-diabolic-free-trade-pacts-eu-africa/feed/ 0
Foreign Investment Expands in Cuba…Despite Everythinghttp://www.ipsnews.net/2017/11/foreign-investment-expands-cubadespite-everything/?utm_source=rss&utm_medium=rss&utm_campaign=foreign-investment-expands-cubadespite-everything http://www.ipsnews.net/2017/11/foreign-investment-expands-cubadespite-everything/#respond Sat, 25 Nov 2017 00:06:28 +0000 Patricia Grogg http://www.ipsnews.net/?p=153198 “Maybe many of us thought that this project was a dream six years ago, but not anymore. The geography has completely changed, because of everything that has been built and the investments that have been approved,” said Nathaly Suárez, director of Construction Management at the Mariel Special Development Zone (ZEDM). The container terminal already has […]

The post Foreign Investment Expands in Cuba…Despite Everything appeared first on Inter Press Service.

]]>
Docks at the container terminal of the Mariel Special Development Zone, designed to attract investments to Cuba, in spite of the restrictions imposed this month by the United States on businesses dealing with this development and logistics zone. Credit: Jorge Luis Baños / IPS

Docks at the container terminal of the Mariel Special Development Zone, designed to attract investments to Cuba, in spite of the restrictions imposed this month by the United States on businesses dealing with this development and logistics zone. Credit: Jorge Luis Baños / IPS

By Patricia Grogg
HAVANA, Nov 25 2017 (IPS)

“Maybe many of us thought that this project was a dream six years ago, but not anymore. The geography has completely changed, because of everything that has been built and the investments that have been approved,” said Nathaly Suárez, director of Construction Management at the Mariel Special Development Zone (ZEDM).

The container terminal already has operations with 14 major international shipping companies and progress has been made in infocommunications, an aqueduct, sewerage, power grids, public lighting, bridges and railway stations, among other works made available to investors.

The ZEDM was born with the support of Brazil, which financed the container terminal with more than 800 million dollars. So far the Zone has 29 km of roads, as well as a double track railway line and overpasses that speed up the transportation of goods.

Activities have not slowed down in this strategic economic centre located about 45 km west of Havana, a few days after it was included by Washington in a list of entities banned for any economic relationship with American companies and travelers.

Suárez, a 31-year-old civil engineer, does not understand why in the 21st century, instead of promoting relations between countries, U.S. President Donald Trump is trying to close the door to trade and investment in Cuba, “a country that is doing everything in favour of its development.”

The young woman belongs to the generations born under the U.S. economic embargo against Cuba. “I’ve lived my whole life under these prohibitions, which prevent my country from buying even medicines from the U.S.,” she told IPS shortly before participating in an exchange with Latin American trade unionists on Nov. 13.

Nathaly Suárez, Director of Construction Management at the Mariel Special Development Zone, in western Cuba. Credit: Jorge Luis Baños / IPS

Nathaly Suárez, Director of Construction Management at the Mariel Special Development Zone, in western Cuba. Credit: Jorge Luis Baños / IPS

The meeting was held at the Pelicano business centre, one of the facilities built by the Construction and Assembly Company of Mariel, where Suárez has under her charge over 100 professionals. With more than 4,500 workers, this firm is responsible for satisfying the demand for construction services in the area.

The ZEDM and its container terminal are among some 180 Cuban entities subject to the restrictions announced on Nov. 8 by Washington, imposed on the grounds that they are related to Cuba’s ministries of the Revolutionary Armed Forces and the Interior.

A megaproject for the region

With an area of 465.4 square kilometers -subdivided into nine sectors to be developed in stages-, the Mariel Special Development Zone aims to be a regional example of attracting foreign capital for the production of goods and services of high added value.

Its geographical location in the centre of the Caribbean region and the Americas, in the junction of the north-south/ east-west axis, puts it in the centre of a circumference of over 1,600 kilometers, where the main routes of the maritime traffic in goods in the Western Hemisphere are located.

“It is early to say whether or not these regulations have an impact. Here we have not stopped working,” said Suarez.

“We have made progress (in the works of the ZEDM) and we will take the necessary measures to continue moving ahead. What are we going to do? We’re not going to say that publicly,” said engineer José Ignacio Galindo, director of Planning and Development of the ZEDM, referring to the strengthening of the US embargo.

Galindo said that the construction of the ZEDM is currently at a launch stage, focused on completing the basic infrastructure and ancillary facilities. “We are working in sector A, which covers some 42 kilometers, although we are also working on roads and other works outside that area. After this come the stages of consolidation and maturity,” he said.

“We know what we want to do. The conclusion of each phase depends on the possibilities and investments available,” he told IPS.

Meanwhile, progress is being made in attracting and accepting businesses, as well as in the investment process for them to begin producing.

During the Havana International Fair, held Oct. 30 to Nov. 3, Teresa Igarza, general director of the ZEDM office, reported that so far 31 businesses have been approved or are already operating in the Zone.

The railway line that transports containers from and to the Mariel Special Development Zone, in the western province of Artemisa, 45 km from the Cuban capital. Credit: Jorge Luis Baños / IPS

The railway line that transports containers from and to the Mariel Special Development Zone, in the western province of Artemisa, 45 km from the Cuban capital. Credit: Jorge Luis Baños / IPS

The investments have come from 14 countries, including Cuba, from Latin America and North America, Europe and Asia. Of the businesses, five are based on 100 percent Cuban capital, 15 are totally foreign, eight are mixed ventures and two are international economic associations. Among the new companies approved is one from the United States, the first from that country to set up shop in the ZEDM.

Rimco Caribe LLC (Puerto Rico) expects to begin operating in the Zone in 2018 as a distributor in Cuba of the US corporation Caterpillar, a manufacturer of construction machinery and mining equipment, diesel engines and industrial gas turbines.

Economist Omar Everleny Pérez Villanueva told IPS that the new restrictions announced by the U.S. are blocking US companies from presenting investment projects in the ZEDM, but those initiatives already approved by Cuba before Jun. 16 would be exempt from penalties.

The new ban complements the memorandum signed by Trump that establishes a policy change towards Cuba, with exceptions to allow travel on commercial airlines and cruise ships, as well as commercial activity authorised up to that moment.

Since the approval of a new law on foreign investment in 2014, more foreign capital has been flowing into Cuba, both within and outside of the ZEDM, although authorities in the sector admit that the results achieved so far are still insufficient for the country’s development needs.

The Mariel Special Development Zone Pelicano Business Centre in western Cuba. Credit: Jorge Luis Baños / IPS

The Mariel Special Development Zone Pelicano Business Centre in western Cuba. Credit: Jorge Luis Baños / IPS

Authorities and experts agree that attracting investment flows to the country is a gradual process in which “modest” progress has been made. This is not only due to the U.S. embargo, but also because of delays in the process of negotiation and approval of investments.

“Foreign business people are concerned about safe ways for sending their capital to Cuba and then sending the dividends earned by the business to their country of origin, as a result of the embargo,” Deborah Rivas, general director of Foreign Investment of the Ministry of Foreign Trade and Foreign Investment, told local media.

However, during an investment forum held in early November, Minister of Foreign Trade and Foreign Investment Rodrigo Malmierca said that this year 30 new projects had been approved for a total of more than two billion dollars in investment.

When Law 118 on Foreign Investment was approved, Malmierca pointed out that the country needed an inflow of some 2.5 billion dollars a year of foreign capital to ensure the growth of the economy.

The new legislation and other official documents propose increasing and diversifying foreign investment as a source of development.

A portfolio of new investment opportunities presented in early November includes up to 50 projects, in sectors such as the pharmaceutical industry, biotechnology, logistics, agribusiness, construction, transport and real estate.

The post Foreign Investment Expands in Cuba…Despite Everything appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/foreign-investment-expands-cubadespite-everything/feed/ 0
Coping with Foreign Direct Investmenthttp://www.ipsnews.net/2017/11/coping-foreign-direct-investment/?utm_source=rss&utm_medium=rss&utm_campaign=coping-foreign-direct-investment http://www.ipsnews.net/2017/11/coping-foreign-direct-investment/#respond Tue, 21 Nov 2017 19:26:04 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=153137 Anis Chowdhury, Adjunct Professor, Western Sydney University and the University of New South Wales (Australia). He held senior United Nations positions during 2008-2016 in Bangkok and New York.
Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Coping with Foreign Direct Investment appeared first on Inter Press Service.

]]>

Foreign Direct Investment (FDI) can make important contributions to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Credit: Ed McKenna/ IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Nov 21 2017 (IPS)

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it “is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented”.

FDI flows
UNCTAD’s 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally weak’ economies remain low and volatile.

FDI inflows add to funds for investment, while providing foreign exchange for importing machinery and other needed inputs. FDI can enhance growth and structural transformation through various channels, notably via technological spill-overs, linkages and competition. Transnational corporations (TNCs) may also provide access to export markets and specialized expertise.

However, none of these beneficial growth-enhancing effects can be taken for granted as much depends on type of FDI. For instance, mergers and acquisitions (M&As) do not add new capacities or capabilities while typically concentrating market power, whereas green-field investments tend to be more beneficial. FDI in capital-intensive mining has limited linkage or employment effects.

Technological capacities and capabilities
Technological spill-overs occur when host country firms learn superior technology or management practices from TNCs. But intellectual property rights and other restrictions may effectively impede technology transfer.

Or the quality of human resources in the host country may be too poor to effectively use, let alone transfer technology introduced by foreign firms. Learning effects can be constrained by limited linkages or interactions between local suppliers and foreign affiliates.

Linkages between TNCs and local firms are also more likely in countries with strict local content requirements. But purely export oriented TNCs, especially in export processing zones (EPZs), are likely to have fewer and weaker linkages with local industry.

Foreign entry may reduce firm concentration in a national market, thereby increasing competition, which may force local firms to reduce organizational inefficiencies to stay competitive. But if host country firms are not yet internationally competitive, FDI may decimate local firms, giving market power and lucrative rents to foreign firms.

Contrasting experiences
The South Korean government has long been cautious towards FDI. The share of FDI in gross capital formation was less than 2% during 1965-1984. The government did not depend on FDI for technology transfer, and preferred to ‘purchase and unbundle’ technology, encouraging ‘reverse engineering’. It favoured strict local content requirements, licensing, technical cooperation and joint ventures over wholly-owned FDI.

In contrast, post-colonial Malaysia has never been hostile to any kind of FDI. After FDI-led import-substituting industrialization petered out by the mid-1960s, export-orientation from the early 1970s generated hundreds of thousands of jobs for women. Electronics in Malaysia has been more than 80% FDI since the 1970s, with little scope for knowledge spill-overs and interactions with local firms. Although lacking many mature industries, Malaysia has been experiencing premature deindustrialization since the 1997-1998 Asian financial crises.

China and India
From the 1980s, China has been pro-active in encouraging both import-substituting and export-oriented FDI. However, it soon imposed strict requirements regarding local content, foreign exchange earnings, technology transfer as well as research and development, besides favouring joint ventures and cooperatives.

Solely foreign-owned enterprises were not permitted unless they brought advanced technology or exported most of their output. China only relaxed these restrictions in 2001 to comply with WTO entrance requirements. Nevertheless, it still prefers TNCs that bring advanced technology and boost exports, and green-field FDI over M&As.

Thus, more than 80% of FDI in China involves green-field investments, mostly in manufacturing, constituting 70% of total FDI in 2001. China has strictly controlled FDI inflows into services, only allowing FDI in real estate recently.

Although long cautious of FDI, India has recently changed its policies, seeking FDI to boost Indian manufacturing and create jobs. Thus, the current government has promised to “put more and more FDI proposals on automatic route instead of government route”.

Despite sharp rising FDI inflows, the share of FDI in manufacturing declined from 48% to 29% between October 2014 and September 2016, with few green-field investments. Newly incorporated companies’ share of inflows was 2.7% overall, and 1.6% for manufacturing, with the bulk of FDI going to M&As.

Policy lessons
FDI policies need to be well complemented by effective industrial policies including efforts to enhance human resource development and technological capabilities through public investments in education, training and R&D.

Thus, South Korea industrialized rapidly without much FDI thanks to its well-educated workforce and efforts to enhance technological capabilities from 1966. Korean manufacturing developed with protection and other official support (e.g., subsidized credit from state-owned banks and government-guaranteed private firm borrowings from abroad) subject to strict performance criteria (e.g., export targets).

Indeed, FDI can make important contributions “to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers …, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises… into regional and global value chains”.

The post Coping with Foreign Direct Investment appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/coping-foreign-direct-investment/feed/ 0
Beyond Piketty: on income inequalityhttp://www.ipsnews.net/2017/11/beyond-piketty-income-inequality/?utm_source=rss&utm_medium=rss&utm_campaign=beyond-piketty-income-inequality http://www.ipsnews.net/2017/11/beyond-piketty-income-inequality/#comments Mon, 20 Nov 2017 08:58:28 +0000 Varsha Kulkarni and Raghav Gaiha http://www.ipsnews.net/?p=153092 Varsha S. Kulkarni is Research Affiliate of the Harvard Institute of Quantitative Social Science, Cambridge, MA, U.S. and Raghav Gaiha is (Hon.) Professorial Research Fellow, Global Development Institute, University of Manchester, Manchester, England.

The post Beyond Piketty: on income inequality appeared first on Inter Press Service.

]]>

Varsha S. Kulkarni is Research Affiliate of the Harvard Institute of Quantitative Social Science, Cambridge, MA, U.S. and Raghav Gaiha is (Hon.) Professorial Research Fellow, Global Development Institute, University of Manchester, Manchester, England.

By Varsha S. Kulkarni and Raghav Gaiha
New Delhi, Nov 20 2017 (IPS)

Have demonetisation and the GST aggravated income inequality?

With the Gujarat State elections barely a few weeks away, the debate on the Indian economy has become increasingly polarised. While the official view of demonetisation unleashed in November 2016 elevates it to a moral and ethical imperative, the chaos caused by the goods and services tax (GST) launched on July 1, 2017, is dismissed as a short-run transitional hiccup. Both policies, it is asserted, are guaranteed to yield long-term benefits, unmindful of large-scale hardships, loss of livelihoods, closure of small and medium enterprises and slowdown of agriculture. Critics of course reject these claims lock, stock and barrel. Lack of robust evidence is as much a problem for the official proponents of these policies as it is for the critics. Hence the debate continues unabated with frequent hostile overtones.

Varsha S. Kulkarni

Tracking income inequality

Beneath the debate are deep questions of inequality and its association with poverty. Thomas Piketty produced a monumental treatise, Capital in the Twenty-First Century, demonstrating that rising income inequality is a by-product of growth in the developed world. More recently, Lucas Chancel and Piketty (2017), in ‘Indian income inequality, 1922-2014: From British Raj to Billionaire Raj?’, offer a rich and unique description of evolution of income inequality in terms of income shares and incomes in the bottom 50%, the middle 40% and top 10% (as well as top 1%, 0.1%, and 0.001%), combining household survey data, tax returns and other specialised surveys.

Some of the principal findings are: one, the share of national income accruing to the top 1% income earners is now at its highest level since the launch of the Indian Income Tax Act in 1922. The top 1% of earners captured less than 21% of total income in the late 1930s, before dropping to 6% in the early 1980s and rising to 22% today. Two, over the 1951-1980 period, the bottom 50% captured 28% of total growth and incomes of this group grew faster than the average, while the top 0.1% incomes decreased. Three, over the 1980-2014 period, the situation was reversed; the top 0.1% of earners captured a higher share of total growth than the bottom 50% (12% v. 11%), while the top 1% received a higher share of total growth than the middle 40% (29% v. 23%).

Raghav Gaiha

True to its modest objective, it offers a rich and insightful description of how income distribution, especially in the upper tail, and inequality have evolved.

Sharp reduction in the top marginal tax rate, and transition to a more pro-business environment had a positive impact on top incomes, in line with rent-seeking behaviour.

India’s wealth gain

According to Credit Suisse Global Wealth Report 2017, the number of millionaires in India is expected to reach 3,72,000 while the total household income is likely to grow by 7.5% annually to touch $7.1 trillion by 2022. Since 2000, wealth in India has grown at 9.2% per annum, faster than the global average of 6% even after taking into account population growth of 2.2% annually. However, not everyone has shared the rapid growth of wealth.

Our research, based on the India Human Development Survey 2005-12, focusses on a detailed disaggregation of income inequality, along the lines of Chancel and Piketty, recognising that incomes in the upper tail are under-reported; and examines the links between poverty and income inequality, especially in the upper tail, state affluence, and prices of cereals.

Our analysis points to a rise in income inequality. A high Gini coefficient of per capita income distribution, a widely used measure of income inequality, in 2005 became higher in 2012. The share of the bottom 50% fell while those of the top 5% and top 1% rose. The gap between the share of the top 1% and the bottom 50% narrowed considerably.

More glaring is the disparity in ratios of per capita income of the top 1% and bottom 50%. The ratio shot up from 27 in 2005 to 39 in 2012. Far more glaring is the disparity in the highest incomes in these percentiles. The ratio of highest income in the top 1% to that of the bottom 50% nearly doubled, from a high of 175 to 346.

All poverty indices including the head-count ratio fell but slightly.

Poverty and inequality

Higher incomes reduced poverty substantially. Inequality measured in terms of share of income of the top 10% increased poverty sharply but only in the more affluent States. Somewhat surprisingly, higher cereal prices did not have a significant positive effect on poverty. Similar results are obtained if the share of the top 10% is replaced with the Gini coefficient as a measure of inequality.

It is plausible that poverty reduction slowed in 2016-17 because of deceleration of income growth; and huge shocks of demonetisation and the GST to the informal sector have aggravated income inequality. Indeed, depending on the magnitudes of these shocks, poverty could have risen during this period.

In sum, regardless of the longer-term outlook and presumed but dubious benefits of the policy shocks, the immiseration of large segments of the Indian population was avoidable.

This opinion editorial was first published in The Hindu

The post Beyond Piketty: on income inequality appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/beyond-piketty-income-inequality/feed/ 1
Finance Following Growthhttp://www.ipsnews.net/2017/11/finance-following-growth/?utm_source=rss&utm_medium=rss&utm_campaign=finance-following-growth http://www.ipsnews.net/2017/11/finance-following-growth/#respond Tue, 14 Nov 2017 14:53:53 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=153017 Anis Chowdhury, Adjunct Professor, Western Sydney University and the University of New South Wales (Australia). He held senior United Nations positions during 2008-2016 in Bangkok and New York.
Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Finance Following Growth appeared first on Inter Press Service.

]]>

Recent research suggests that eyond a certain point, the benefits of financial development diminish, with further development possibly even hurting growth. Credit: IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Nov 14 2017 (IPS)

Economists of all persuasions recognize the critical role of finance in economic growth. The financial sector’s stability and depth are widely considered important in this connection.

Thus, many believe that the lack of a well-developed financial sector constrains growth in developing countries. Neoliberals generally attribute this to excessive regulation, especially the role of state-owned financial institutions, interest rate limits and restrictions on short-term cross-border capital flows.

It is often assumed that banks and financial markets allocate capital to the most productive endeavours, and that the financial infrastructure for credit reduces ‘information inefficiencies’, such as ‘moral hazard’ and ‘adverse selection’. Another presumption is that greater financial development will ensure sufficient finance for otherwise excluded sectors, thus raising growth potential.

Financial deregulation
Following the sovereign debt crises of the early 1980s precipitated by the sudden hikes in US Federal Reserve interest rates, neoliberal economists have advocated financial sector deregulation. It was a standard part of the Washington Consensus also including privatization and economic liberalization more broadly.

This agenda was typically imposed as part of structural adjustment programmes required by the Bretton Woods institutions (BWIs), led by the World Bank. However, many developing country and transition economy governments adopted such policies even if not required to do so, following the neo-liberal counter-revolution against Keynesian and development economics.

Financial deregulation, privatization and liberalization also gained momentum in the developed world, especially in the UK and the USA following the elections of Margaret Thatcher and Ronald Reagan in 1979 and 1980 respectively. In the US, such reforms culminated in the repeal of the Glass-Steagall Act in 1999 when President Clinton declared “the Glass-Steagall law is no longer appropriate”.

Initial results of financial liberalization generally seemed encouraging. Deregulating countries experienced rapid financial expansion and innovation. Finally, it seemed that the long elusive elixir of growth had been found. Finance had a free hand, expanding much faster than the real economy.

But soon, with inadequate prudential regulation and supervision, booms became bubbles as excesses threatened financial and economic stability, besides undermining the real economy. Economies became increasingly prone to currency, financial and banking crises such as the 1994 Mexican peso crisis, 1997-1998 Asian financial crisis, 1998 Russian financial crisis and the 2007-2009 global financial crisis.

Tipping point?
Recent research suggests that beyond a certain point, the benefits of financial development diminish, with further development possibly even hurting growth. In other words, the finance-growth relationship is not linear; it may be positive to a point, before turning negative.

Additional finance beyond this tipping point thus becomes increasingly counterproductive. By exacerbating macro-financial fragility, credit growth thus leads to bigger booms, bubbles and busts, ultimately leaving countries worse off. Interestingly, research done at the BWIs also finds that rapid credit growth is commonly associated with banking crises.

The IMF found that three quarters of credit booms in emerging markets end in banking crises. The OECD found that deregulating finance over the past three decades has stunted, not boosted, economic growth. It concluded that further credit expansion beyond exceeding three-fifths of GDP not only dents long-term growth, but also worsens economic inequality.

A commonly used measure of financial development – average private credit to GDP – increased steadily from about 1960. It has grown more rapidly since around 1990 – exceeding 100% in developed economies and 70% in emerging market developing economies (EMDEs).

The OECD report also found that over the past half century, credit from banks and other institutions to households and businesses has grown three times faster than economic activity. But GDP growth per capita changed little before and after 1990, with a strong negative relationship between finance and growth emerging after 1990, especially in the Eurozone.

EMDEs with lower credit-to-GDP ratios benefited from more credit growth, experiencing a positive finance-growth relationship until about 1990. But with higher credit-to-GDP ratios, the finance-growth relationship turned negative in developed economies well before 1990. Hence, thresholds for credit-to-GDP ratios are likely to be higher for EMDEs than for developed economies.

Finance following growth?
The new research also points to the possibility of reverse causality – of financial development necessitated by growth. This seems to support Joan Robinson’s suggestion that “where enterprise leads, finance follows”. More money and credit become available as demand for both increases with economic growth.

After all, money and credit are supposed to lubricate the real economy. EMDEs start from relatively low incomes and therefore have greater growth potential. As they realize that potential, demand for finance leads to greater financial development.

In the case of developed economies, especially the Eurozone, finance continued to grow even as growth slowed. Apparently, savings adjusted slowly to sluggish income growth, resulting in a rising wealth-to-GDP ratio.

This, in turn, creates demand for finance as households seek to ‘park’ their savings, borrow for consumption and buy new consumer durables. Thus, the financial system grows even as economic growth continues to decline. This may result in rising household indebtedness, or increasing debt-to-income ratios, ending in debt defaults.

Policy lessons
Besides being cognizant of “too much finance” beyond a tipping point, policymakers need to be aware that causality may run in both directions. Therefore, financial development must accompany productivity enhancement.

Financial liberalization, or other financial development policies alone cannot spur productivity growth. Without entrepreneurship, finance is likely to prove to be an illusory source of growth.

This is important as short-term capital inflows cannot enhance productive long-term investments. Short-term capital flows are easily reversible, and can suddenly leave, plunging countries into financial crisis.

If the financial sector continues to grow after growth potential falls, it greatly increases the relative size and role of finance, thus accelerating the likelihood of financial instability. Countries need strong macro-prudential regulations to contain such vulnerabilities.

The post Finance Following Growth appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/finance-following-growth/feed/ 0
Emerging Markets at Risk Againhttp://www.ipsnews.net/2017/11/emerging-markets-risk/?utm_source=rss&utm_medium=rss&utm_campaign=emerging-markets-risk http://www.ipsnews.net/2017/11/emerging-markets-risk/#respond Wed, 08 Nov 2017 06:59:41 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=152932 Jomo Kwame Sundaram, a former economics professor and United Nations Assistant Secretary-General for Economic Development, received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Emerging Markets at Risk Again appeared first on Inter Press Service.

]]>

Very rarely are the root causes of economic crises and vulnerability addressed. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Nov 8 2017 (IPS)

Emerging market governments often draw lessons from previous financial crises – or at least claim to do so – to prevent their recurrence. However, such preventive measures are typically designed to address the causes of the last crisis, not the next one. Hence, some measures adopted may inadvertently become new sources of instability and crisis.

Very rarely are the root causes of crises and vulnerability addressed. In their efforts to prove themselves as worthy emerging markets, they tend to be pro-active in joining the financial globalization bandwagon. But premature financial liberalization – with hasty integration into the international financial system, typically without adequate prudential multilateral mechanisms for speedy and orderly resolution of external liquidity and debt crises – can be very dangerous and costly.

Future currency crises different
Many governments claim to have learnt from the 1997-1998 Asian financial crises and the 2007-2009 global financial crisis. But while measures implemented may be effective in preventing recurrence, they may be inappropriate, inadequate or worse, even counterproductive with changing, deepening financial integration.

After mid-1997, Southeast Asian governments abandoned their informal currency pegs after incurring high costs trying to defend them. Moving to flexible exchange rates ended ‘one-way (sure-win) bets’ for some speculators, while entailing disruptive currency devaluations.

Since the crises, banking regulation and supervision have undoubtedly improved, e.g., reducing currency and maturity mismatches in bank balance sheets. However, in this day and age, stable exchange rates can no longer be ensured with unregulated capital mobility.

In fact, currency crises can occur with either fixed or flexible exchange rates. With flexible rates, inflows cause currency appreciations, encouraging even more inflows, which will inevitably be reversed, often quite abruptly.

Capital inflows into securities markets are far more important today than banks intermediating cross-border capital flows in the 1990s. Corporate bond issues have also grown much faster than international bank lending, whether directly or through local intermediaries. Yet, such measures have not prevented credit and asset price bubbles.

Emerging markets have further liberalized foreign direct investment (FDI) regimes and encouraged foreign participation in equity markets, presuming that equity liabilities are less risky than external debt. Hence, foreign shares of market capitalization have reached unprecedented levels, much higher than in the US. With emerging markets more susceptible, a little foreign investment can ‘make (emerging) markets’, causing large price swings.

Currency mismatches
East Asian authorities have also reduced currency mismatches in their own balance sheets and exchange rate risk exposure by opening domestic bond markets to foreigners and borrowing in their own currencies. Consequently, sovereign debt is now much more exposed to foreign creditors than in reserve currency countries.

Much higher shares of most emerging market sovereign bonds are held by foreigners, usually privately, rather than by central banks. In contrast, most of Japan’s very high sovereign debt is held by Japanese creditors while around a third of US Treasury bonds are held by non-residents.

Encouraging foreign participation in sovereign bond markets has helped pass currency risk to creditors, but also reduced autonomy over long-term rates and increased exposure to interest rate shocks from abroad, e.g., when the US Fed raises interest rates again.

Greater capital account liberalization besides encouraging domestic corporations to borrow from and invest abroad have resulted in massive debt accumulation in low interest rate reserve currencies, especially with recent ‘unconventional’ monetary policies. Thus, reducing sovereign debt currency mismatches has been offset by increased private corporate fragility due to greater exchange rate risks.

Regulatory constraints on resident individuals and institutional investors purchasing foreign securities and real estate have also been relaxed. Capital account liberalization has enabled resident capital outflows claiming these will ‘balance’ foreign inflows. But such private accumulation of foreign assets will not be available to national authorities in case of panicky capital flight.

Hence, national currencies are especially vulnerable when the capital account is open and foreign control of domestic financial assets is significant. As experience has shown, macro-financial volatility may suddenly precipitate massive outflows.

Self-insurance delusion
Since the turn of the century, emerging markets have been seeking ‘self-insurance’ in managing external balances by accumulating ‘adequate’ international reserves from trade surpluses and capital inflows. Hence, foreign reserves in most East Asian countries are often enough to meet conventional external liabilities, but not enough to cope with massive reversals of foreign portfolio investments and capital flight by residents.

Despite the crises of the last two decades, emerging markets’ capital accounts are much freer now than then. Asset markets and currencies of all East Asian emerging markets with ‘enough’ foreign reserves have nevertheless been shaken several times in the past decade.

But such short-lived instability episodes did not cause severe damage as they only involved temporary shifts in market sentiments. Nevertheless, they hint at likely threats when ‘quantitative easing’ in the North could be reversed soon.

As ‘self-insurance’ is probably insufficient to cope with massive capital flight, the usual option is to ‘seek help’ from the IMF and reserve-currency countries. Another involves ‘bailing in’ international creditors and investors using foreign exchange controls, temporary ‘debt standstills’ and other measures to protect jobs and the economy.

But such unilateral measures may be difficult and costly due to resistance from creditor country governments, acting at the behest of the powerful financial interests involved.

The post Emerging Markets at Risk Again appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/11/emerging-markets-risk/feed/ 0
Mounting Illicit Financial Outflows from Southhttp://www.ipsnews.net/2017/10/mounting-illicit-financial-outflows-south/?utm_source=rss&utm_medium=rss&utm_campaign=mounting-illicit-financial-outflows-south http://www.ipsnews.net/2017/10/mounting-illicit-financial-outflows-south/#respond Tue, 31 Oct 2017 15:25:02 +0000 Jomo Kwame Sundaram and Zera Zuryana Idris http://www.ipsnews.net/?p=152831 Jomo Kwame Sundaram and Zera Zuryana Idris are Malaysian economic researchers.

The post Mounting Illicit Financial Outflows from South appeared first on Inter Press Service.

]]>

The latest Global Financial Integrity report shows that illicit financial outflows from developing countries continue to grow rapidly. Credit: Amantha Perera/IPS

By Jomo Kwame Sundaram and Zera Zuryana Idris
KUALA LUMPUR, Oct 31 2017 (IPS)

Although quite selective, targeted, edited and carefully managed, last year’s Panama Papers highlighted some problems associated with illicit financial flows, such as tax evasion and avoidance. The latest Global Financial Integrity (GFI) report shows that illicit financial outflows (IFFs) from developing countries, already at alarming levels, continue to grow rapidly.

Illicit financial flows growing rapidly
With international financial liberalization enabling investments abroad, ‘legitimate outflows’ have also been growing rapidly, heightening macro-financial risks to countries. Many of today’s financial centres compete intensely to attract customers by offering lower tax rates and banking secrecy.

It is generally presumed that IFFs are related to tax evasion and corruption. Such financial flows largely involve financial service providers, law offices and companies with transnational activities, often involving investments in real estate and other assets worth billions. Besides enabling governments and legislation, legal and accounting firms as well as shell companies have been crucial.

The GFI report estimates that developing countries lost somewhere between $620 billion (bn) and $970 bn in illicit outflows in 2014. The Washington-based think tank found IFFs from the South to be 4.2-6.6% of total developing country trade for 2014, while inflows were 9.5-17.4%. Total IFFs of all developing countries in 2014 were estimated at $2,010-3,507 bn.

Illicit financial flows of all developing countries, 2004-2013

During 2005-2014, IFFs from the South were 4.6-7.2% of developing countries’ total trade, while such inflows were 9.5-16.8%. GFI attributes about 3.3% of IFFs over this period to fraudulent trade mis-invoicing or ‘transfer pricing’.

China, Russia, Mexico, India and Malaysia lead all countries in illicit capital flight. Since 2012, emerging and developing countries have lost over a trillion dollars yearly that could invested productively in industry, agriculture, healthcare, education, or infrastructure.

Methodological doubts

GFI estimates have been criticized, e.g., for making unrealistic assumptions about trade-related transport costs and ignoring other explanations for ‘errors’. For instance, estimated GFI outflows include IFFs and trade mis-invoicing estimated from inconsistencies in trade data.

For GFI, ‘leakages’ (errors and omissions) in the balance of payments (BoP) are a type of IFFs. It assumes that all unreported leakages in inflows and outflows of a country are illicit. While long associated with capital flight, such BoP leakages may include legitimate reporting errors, as the report recognizes. But as such leakages only account for a small fraction of total IFFs estimated by GFI, they are not likely to appreciably affect overall estimates.

Criminal activities
IFFs in developing countries may also be due to transnational criminal activities, which GFI estimates globally for 2014 as follows: counterfeiting ($923-1,130 bn), drug trafficking ($426-652 bn), illegal logging, ($52-157 bn), human trafficking ($150.2 bn), illegal mining ($12-48 bn), illegal fishing ($15.5-36.4 bn), illegal wildlife trade ($5-23 bn), crude oil theft ($5.2-11.9 bn), small arms and light weapons trafficking ($1.7-3.5 bn), organ trafficking ($840m-1.7 bn), trafficking in cultural property ($1.2-1.6 bn), totalling $1.6-2.2 trillion.

‘Legitimate outflows’ have also increased rapidly in recent years. Besides the decades-old promotion of tax exemption for ‘free trade’ or export-processing zones, some emerging market economies have recently promoted and enabled outward foreign direct and portfolio investments.

Such capital outflows are said to balance portfolio investment inflows increasing foreign ownership of emerging market economies’ corporate sectors. But such ‘balancing’ provides no protection in the event of financial panic and a rush to exit. The push for ever greater financial liberalization thus exposes them to greater fragility and vulnerability.

Participating in such a ‘race to the bottom’ by offering tax loopholes typically involves making ever more concessions to the rich and powerful. Rich countries have been quite selective in administering anti-bribery rules, and rarely take effective action, e.g., to prevent anonymous companies being abused, as highlighted by last year’s Panama Papers revelations.

International cooperation needed
The nature and scale of illicit flows mean that international cooperation is urgently needed. While progress has been slow at the United Nations, the cooperation of the International Monetary Fund and other multilateral institutions will be vital for progress. If not, rich countries will continue to ‘call the shots’ through the OECD ‘rich country club’, which has been dominant on international tax matters.

Peak national authorities should work closely with different bodies like the central bank, tax revenue authorities, customs authorities and police to enhance tax collection, increase government transparency, improve natural resource control by government, and enable public scrutiny of revenues and other public accounts.

Such efforts will require more evidence and modes of investigation, as well as the cooperation of all relevant parties. Ultimately, political will, especially to take on powerful vested interests, will make the difference.

Further international financial integration after the 1997-1998 Asian financial crises and the 2007-2009 global financial crisis has resulted not only in fast growing financial outflows from the South, but also in greater vulnerability to new sources of volatility and instability.

The post Mounting Illicit Financial Outflows from South appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/mounting-illicit-financial-outflows-south/feed/ 0
Why 1997 Asian Crisis Lessons Losthttp://www.ipsnews.net/2017/10/1997-asian-crisis-lessons-lost-2/?utm_source=rss&utm_medium=rss&utm_campaign=1997-asian-crisis-lessons-lost-2 http://www.ipsnews.net/2017/10/1997-asian-crisis-lessons-lost-2/#comments Tue, 24 Oct 2017 17:10:28 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=152689 Jomo Kwame Sundaram, a former economics professor and United Nations Assistant Secretary-General for Economic Development, received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Why 1997 Asian Crisis Lessons Lost appeared first on Inter Press Service.

]]>

The initial response to the East-Asian crises was to blame poor macroeconomic and fiscal policies. Credit: IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Oct 24 2017 (IPS)

Various different, and sometimes contradictory lessons have been drawn from the 1997-1998 East Asian crises. Rapid or V-shaped recoveries and renewed growth in most developing countries in the new century also served to postpone the urgency of far-reaching reforms. The crises’ complex ideological, political and policy implications have also made it difficult to draw lessons from the crises.

Conventional wisdom
The conventional wisdom was to blame the crisis on bad economic policies pursued by the governments concerned. Of course, the vested interests favouring the international financial status quo or further liberalization also impede implementing needed reforms. Such interests continue to be supported by the media.

Citing currency crisis theory, the initial response to the crises was to blame poor macroeconomic, especially fiscal policies, although most East Asian economies had been maintaining budgetary surpluses for some years. Nevertheless, the IMF and others, including the international business media, urged spending cuts and other pro-cyclical policies (e.g., raising interest rates) which worsened the downturns.

Such policies were adopted in much of the region from late 1997, precipitating sharper economic collapses. By the second quarter of 1998, however, it was increasingly recognized that these policies had worsened, rather than reversed the economic deterioration, transforming currency and financial crises into crises of the real economy.

By early 1998, however, as macroeconomic orthodoxy lost credibility, the blame shifted to political economy, condemning ‘cronyism’ as the cause. US Federal Reserve Bank chair Alan Greenspan, US Treasury Deputy Secretary Lawrence Summers and IMF Managing Director Michel Camdessus formed a chorus criticizing Asian corporate governance in quick sequence over a month from late January.

The dubious conventional explanations of the Asian crises were not shared by more independently minded mainstream economists with less ideological prejudices. The World Bank’s chief economist Joseph Stiglitz and other prominent Western economists such as Paul Krugman and Jeffrey Sachs supported Keynesian counter-cyclical policies.

Regional contagion and response
The transformation of the region’s financial systems from the late 1980s had made their economies much more vulnerable and fragile. Rapid economic growth and financial liberalization attracted massive, but easily reversible, footloose capital inflows.

New regulations encouraged short-term lending, typically ‘rolled over’ in good times. Much of these came from Japanese and continental European banks as UK and US banks continued to recover from the 1980s’ sovereign debt crises. But these gradual inflows suddenly became massive outflows when the crisis began.

Significant inflows were also attracted by stock market and other asset price bubbles. The herd behaviour characteristic of capital markets exacerbated pro-cyclical market behaviour, heightening panic during downturns. Fickle market behaviour also exacerbated contagion, worsening regional neighbourhood effects.

Japan’s offer of US$100 billion to manage the crisis in the third quarter of 1997 was quickly stymied by the US and the IMF. Instead, a more modest amount was made available under the Miyazawa Plan to finance more modest facilities, institutions and instruments.

Much later, in Chiang Mai, Thailand, the region’s finance ministers approved a series of bilateral credit lines or swap facilities, conditional on IMF approval. Many years later, the finance ministers of Japan, China and South Korea ensured that these arrangements were regionalized, and no longer simply the aggregation of bilateral commitments, while increasing the size of the credit facility.

New International Financial Architecture
A year after the crisis began in July 1997, US President Clinton called for a new international financial architecture. The apparent spread of the Asian crisis to Brazil and Russia underscored that contagion could be more than regional.

The collapse of Long-Term Capital Management (LTCM) following the Russian crisis led the US Federal Reserve to intervene in the market to coordinate a private sector bailout. This legitimized government interventions to ensure functioning financial systems and sufficient liquidity to finance economic recovery.

After the US Fed lowered interest rates, capital flowed to East Asia once again. The Malaysian government’s establishment of bailout institutions and mechanisms in mid-1998 and its capital controls on outflows from September 1998 also warned that other countries might go their own way.

Ironically, the economic recoveries in the region from late 1998 weakened the resolve to reform the international financial system. Talk of a new international financial architecture began to fade as recovery was presented as proof of international financial system resilience.

The post Why 1997 Asian Crisis Lessons Lost appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/1997-asian-crisis-lessons-lost-2/feed/ 1
To Eliminate Poverty, Better Understanding Neededhttp://www.ipsnews.net/2017/10/eliminate-poverty-better-understanding-needed/?utm_source=rss&utm_medium=rss&utm_campaign=eliminate-poverty-better-understanding-needed http://www.ipsnews.net/2017/10/eliminate-poverty-better-understanding-needed/#comments Wed, 18 Oct 2017 15:05:31 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=152572 Anis Chowdhury, a former professor of economics at the University of Western Sydney, held senior United Nations positions during 2008–2015 in New York and Bangkok. Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post To Eliminate Poverty, Better Understanding Needed appeared first on Inter Press Service.

]]>

The latest Bank data on global poverty suggests that 767 million people, or 10.7% of the world’s population, live in extreme poverty. Credit: IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Oct 18 2017 (IPS)

As the United Nations’ Second Decade for the Eradication of Poverty (2008-2017) comes to an end, more self-congratulation is likely. Claims of victory in the war against poverty will be backed by recently released poverty estimates from the World Bank, entrusted by the UN system to monitor poverty.

Mismeasuring poverty
The latest Bank data on global poverty suggests that 767 million people, or 10.7% of the world’s population, live in extreme poverty, compared to some 42% of the world’s population in 1981. Earlier figures suggested that most progress was due to East Asia, especially China.

The Bank’s international poverty line was revised from a dollar a day in 1985 to $1.08 in 1993, $1.25 in 2005, and $1.90 in 2011. Poverty estimates for 2011 are available using both $1.90 and $1.25 per day poverty lines. Global poverty has fallen from 14.5% of the world’s population (or 1,011 million people) using the $1.25 poverty line or 14.2% (or 987 million) with the new $1.90 line! Global poverty has thus declined more using the new yardstick, confounding those who expected a statistical explosion in the number of poor with the 52% increase during 2005-2011!

Echoing an earlier complaint, economics Nobel Laureate Angus Deaton believes that the World Bank has an “institutional bias towards finding more poverty rather than less” to ‘keep itself in business’ leading the fight against global poverty. No wonder the World Bank faces a serious credibility problem when it comes to its poverty role.

The World Bank’s poverty estimation methodology is problematic, as admitted by Martin Ravallion who pioneered its dollar-a-day measure. Doubts remain, even after several adjustments. The Bank’s poverty line appears arbitrary as it has not been consistently anchored to a broadly accepted specification of basic human needs.

Asian progress exaggerated
The Asian Development Bank (ADB) argued that the World Bank’s $1.25 yardstick was not representative of Asia, the continent that has supposedly contributed most to the decline in global poverty according to the Bank. There were only two Asian countries, compared to 13 African countries, in the sample with which the World Bank set its $1.25 benchmark.

The ADB deems other factors more relevant, such as living costs for Asia’s poor, food costs rising faster than the general price level, and vulnerability to natural disasters, climate change, economic crises and other shocks. Its estimated extreme poverty rate for Asia in 2010 thus increased by 28.8 percentage points to 49.5% while the estimated number of poor jumped by 1.02 billion to 1.75 billion people!

It is now widely agreed that poverty is multidimensional while the Bank still uses ‘money-metric’ measures. The UN Development Programme’s Human Development Report (HDR) publishes its Multidimensional Poverty Index (MPI) considering multiple deprivations across three dimensions – health (nutrition, child mortality), education (years of schooling, school enrolment) and living standards (cooking fuel, toilet, water supply, electricity, flooring, assets).

About 1.5 billion people in the 102 developing countries currently covered experience such acute deprivations. Close to 900 million people are vulnerable to falling into poverty following setbacks due to financial crisis, natural disaster and other factors.

Globalization reduced poverty?

With little convincing evidence, The Economist (30 March 2017) attributed the world’s “great progress in eradicating extreme poverty” to globalization.

In the Globalization and Poverty book, 15 economists considered whether globalization has helped spread wealth, as often claimed. They conclude that the poor benefit from globalization when appropriate complementary policies, such as investments in human resources, infrastructure, credit promotion, technical assistance and supportive institutions, are in place.

Most supposed evidence is indirect, suggesting poverty reduction is mainly due to growth attributed to globalization. But recent globalization has also seen sharply increased inequality and volatility, including more frequent and deeper financial crises.

Other policies associated with globalization and liberalization, such as privatization, financial sector deregulation and pro-cyclical macroeconomic policies, have also harmed the poor. The efficacy of programmes, such as microfinance and governance reforms, in significantly reducing poverty is now very much in doubt.

Rethinking poverty
The United Nations’ Report on the World Social Situation 2010 – Rethinking Poverty, and our accompanying volume, Poor Poverty, affirmed the urgent need to abandon the market fundamentalist thinking, policies and practices of recent decades in favour of more sustainable development- and equity-oriented policies appropriate to national conditions and circumstances. Such new thinking on poverty and its eradication can be summarized as follows:

• Dominant mainstream perspectives have led to poor, ineffectual policy prescriptions.
• Poverty reduction is helped by sustained growth of output and decent jobs.
• Growth helps raise incomes and fiscal resources for social spending.
• Growth needs to be more stable, with consistently counter-cyclical macroeconomic policies and better capacity to deal with exogenous shocks.
• Progressive structural change and inequality reduction are crucial for development.
• Social provisioning accelerates development and poverty reduction.
• Social protection can better mitigate negative shocks, prevent people becoming much poorer, and help generate economic activities and livelihoods.
• A basic social protection floor is affordable in most countries, although poorer countries will progress faster with donor support.

The post To Eliminate Poverty, Better Understanding Needed appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/eliminate-poverty-better-understanding-needed/feed/ 2
Women: Major Drivers & Beneficiaries of Poverty Eradicationhttp://www.ipsnews.net/2017/10/women-major-drivers-beneficiaries-poverty-eradication/?utm_source=rss&utm_medium=rss&utm_campaign=women-major-drivers-beneficiaries-poverty-eradication http://www.ipsnews.net/2017/10/women-major-drivers-beneficiaries-poverty-eradication/#respond Tue, 17 Oct 2017 13:54:28 +0000 Lakshmi Puri http://www.ipsnews.net/?p=152549 Lakshmi Puri is Assistant Secretary-General & Deputy Executive Director of UN Women

The post Women: Major Drivers & Beneficiaries of Poverty Eradication appeared first on Inter Press Service.

]]>

Lakshmi Puri is Assistant Secretary-General & Deputy Executive Director of UN Women

By Lakshmi Puri
UNITED NATIONS, Oct 17 2017 (IPS)

This year marks the 25th anniversary of the declaration of 17 October as the International Day for the Eradication of Poverty by the United Nations General Assembly. Under the theme “Answering the Call of October 17 to end poverty: A path toward peaceful and inclusive societies,” this year’s commemoration reminds us of the importance of equality, dignity, solidarity and equal voice in the fight to end poverty everywhere.

Enabling Policy Environments · Equal Participation of Rural Women in Decision-making. Credit: UN Women/Gangajit Singh Chandok

Equally, the fight to end poverty is also a call to arms against gender-based discrimination and violence that has led to an increase in the feminization of poverty in both developed and developing countries, as well as in rural and urban areas. Moreover, gender-based discrimination and violence have also thwarted well intentioned attempts to make poverty history once and for all.

The symbiosis between SDGs on poverty eradication & gender equality

The Universal Declaration of Human Rights, adopted by the UN General Assembly in 1948, states that everyone has the right to a standard of living adequate for health and well-being, including food, clothing, housing and medical care and necessary social services.

The General Assembly resolution entitled “Transforming our world: the 2030 Agenda for Sustainable Development”, (2030 Agenda) declared that eradicating poverty in all its forms and dimensions, including extreme poverty, is one of the greatest global challenges and priorities and an indispensable requirement for sustainable development.

Sustainable Development Goal 1 (SDG 1) vows to eradicate extreme poverty everywhere by 2030, reduce the proportion of women, men and children of all ages living in poverty in all its dimensions by half, provide social protection coverage including social protection floors for the poor. It also sets out the need for everyone to have access, ownership and control over productive resources and essential services.

The trinity of women and girls’ economic empowerment, autonomy and rights must be linked, horizontally and vertically, to the realization of SDG 5 on achieving gender equality and empowering all women and girls and its nine targets. Sustainably and irreversibly eradicating poverty requires all poverty reduction and development strategies, policies and measures to make SDG 5 their lodestar and to cultivate an enabler and beneficiary symbiosis between SDG1 and 5.

Poverty link with other SDGs and women’s and girls’ empowerment

The 2030 Agenda also recognizes that realizing gender equality and the empowerment of women and girls will make a crucial contribution to the progress made across all goals and targets, along with the gender-responsive implementation of the entire Agenda. In turn, the role that each SDG plays in gender-responsive poverty reduction action is of critical importance for the empowerment of women and girls.

Attacking multidimensional poverty of women and girls means addressing the poverty linked gender gaps and deficits in education (SDG 4), in water, sanitation and hygiene (SDG 6), in food security and sustainable agriculture (SDG 2), in sustainable energy (SDG 7), in housing, safe public spaces and transport (SDG 11), and in information and communication technologies (ICT) and other technologies (SDG 5b).

Providing access to comprehensive healthcare services (SDG 3) and ensuring universal access to sexual and reproductive health and rights (SDG 5.6) is fundamental to both poverty eradication and gender equality and women’s empowerment. Child marriage, maternal mortality, women’s lack of control over their bodies and on childbearing, including through their lack of access to information and contraception, swells the ranks of the poor and that over generations.

Women’s burden of care work and poverty eradication

Poverty eradication is about enabling women to have income security, sustainable livelihoods, access to decent work, and full and productive employment (SDG 8). It is about valuing, reducing, and redistributing unpaid care and domestic work, and the provision of infrastructure and social protection as targeted in SDG 5.4, which otherwise creates and perpetuates time and other types of poverty for women and girls and deprives them of other opportunities.

Care work for the family and the community is essential to human life and to the social and economic foundations of all economies. It enables the “productive” economy to function as it supports the well-being of the workforce, children, older persons and people with disabilities, and subsidizes the monetized economy.

Women’s unpaid work contributes $10 trillion per year globally, or 13 per cent of global GDP, according to the High-level Panel for Women’s Economic Empowerment. Hence, we need to implement a gender-responsive approach to fashioning a new quality, paid care economy as we tackle the poverty, jobs, economic growth and inequality crisis and nexus.

SDG 5 targets on violence and leadership in decision making

We must prevent and effectively respond to all forms of violence and harmful practices against women and girls in all spaces (SDG 51 and 5.2), and help the more poor and vulnerable among them to escape the dual trap of poverty and sexual and gender-based violence, exploitation and trafficking. Their voices, participation and leadership in governance, from the grassroots level to the highest levels in political, public and economic life, as well as in the cultural and social spheres, as accounted for in SDG 5.4, are critical and proven to be effective in poverty reduction.

Challenges to overcome

Despite global economic growth and a reduction in poverty over the last 30 years, evidence indicates that about 2.1 billion people are still living in poverty, with 700 million living in extreme poverty. Even in countries where poverty has been reduced, pervasive inequalities remain between rural and urban areas, between regions, between ethnic groups, and between men and women.

These inequalities and inter-sectionalities are reflected in the struggles of women and girls who face multiple forms of discrimination and disadvantage over and above that of poverty and gender. Structural barriers and discriminatory social norms continue to constrain women’s decision-making power and political participation in households and communities. Furthermore, poor women and girls face compounded challenges due to physical and mental disability.

Gender disparities in poverty are also rooted in inequalities in access to economic resources, participation in the formal economy and labour force (only 50 per cent), income disparities including the gender wage gap, and assets and social protection gaps. Women-headed households and their families risk falling into poverty, depleting their assets in response to shocks and engaging in distress sales of labour to meet immediate subsistence needs.

Women’s lower incomes and limited access to other resources such as land, credit, and assets can reduce their bargaining power within a household. As such, women experience a restricted ability to exercise their preferences in the gender division of unpaid/paid labor, the allocation of household income and their ability to exit harmful relationships is also impeded. Thus, promoting women’s economic empowerment can foster a more gender-equitable and gender-responsive pattern of economic development and be a panacea for poverty.

The risk factors of migration, conflict, and natural disasters

As the New York Declaration for Refugees and Migrants highlights, experiences of multidimensional poverty can influence people’s propensity to migrate, from rural to urban or developing to developed contexts. It can also be a root cause of conflict due to unequal distribution and access to resources. In 2015, the number of international migrants surpassed 244 million, growing at a rate faster than the world’s population.

Women account for at least half the world’s migrants affected by the push factor of poverty and pull factor of a better, gender equal future. Women and girls account for 60 per cent of refugees escaping violence, climate change, natural disasters and the resulting dislocation, violence and poverty.

Macroeconomic policies are important instruments as they can create an enabling environment and help reduce deprivations and conditions of poverty. Public investments in social care infrastructure, for instance, can be a self-sustaining way of creating more productive employment opportunities for women. Investments in basic physical infrastructure and transport services can enhance the productivity of women’s informal enterprises.

Social protection & poverty eradication

Social protection policies play a critical role in reducing poverty and inequality, supporting economic growth and increasing gender equality. The impact of social protection on reducing feminized poverty by increasing women’s household income is well documented.

Many informal workers are women who may interrupt paid employment to take care of children, elderly parents, and sick relatives, thereby compromising their access to social protection and 40 per cent of employed women lack maternity benefits.

Well-designed social protection schemes can narrow gender gaps in poverty rates, enhance women’s access to personal income and provide a lifeline for families. Social protection measures that countries have taken include universal health coverage, non-contributory pensions, maternity and parental leave, basic income security for children and public works programmes.

The way forward to a gender equal, poverty free world

A truly transformative, gender responsive development and poverty eradication agenda can drive change on systemic issues and structural causes of poverty and discrimination, including unequal gender relations, social exclusion and multiple forms of discrimination and marginalization.

In this equitable and people-centered development framework, empowering and fully tapping into the talent and potential of half of humanity that is systematically marginalized from the benefits of development, is critical.

In this context, Governments and stakeholders should ensure a gender perspective is included while undertaking value chain, delivery of public services and social protection impact analyses to inform the design and implementation of poverty eradication policies and programmes.

Also, women’s access to financing and investment opportunities, tools of trade, business development, and training to increase the share of trade and procurement from women’s enterprises, including micro, small and medium, cooperatives and self-help groups in both the public and private sectors, are critical entry points to grant women equal opportunities and allow them to reach their full potential.

Other specific gender-responsive poverty eradication efforts include:
• Increasing women’s access to and control over economic opportunities, resources and services;
• Increasing women’s economic, social and political leadership at all levels, including through women’s organizations and collectives;
• Promoting gender-responsive macroeconomic policies that support the creation of full and productive employment opportunities and decent work for women;
• Expanding fiscal space and generating sufficient resources to invest in gender equality and women’s empowerment by increasing public investments in physical and social care infrastructure, including water and sanitation infrastructure and renewable energy sources, as time well as – and energy-saving infrastructure and technology;
• Expanding or reprioritizing public expenditures to provide gender-responsive social protection for women and men throughout the life cycle;
• Ensuring that national laws contain provisions for core labour standards, including minimum wages and secure labour contracts, worker benefits and labour rights for workers in informal employment, and ending workplace discrimination on the basis of gender, ethnic background, migration status or disability;
• Adopting laws and regulatory frameworks to reduce and redistribute unpaid care and domestic work for women through measures such as care leave policies, care insurance schemes, flexible workplace practices for work-life balance, decent work hours and cash transfers or child support grants paid to the primary caregiver;
• Adopting measures that recognize, reduce and redistribute the contribution of unpaid care and domestic work to the national economy through the implementation of time-use surveys and the adoption of satellite accounts;
• Protecting the rights to collective bargaining and freedom of association to enable women workers, especially informal workers, to organize and to join unions and workers’ cooperatives;

Overall, poverty eradication would only be possible if women’s human rights and fundamental freedoms are strongly upheld with universality, indivisibility and interconnections of economic, social, cultural and labour rights framing women’s economic empowerment and women’s work in all contexts.

Therefore, advancing women’s economic rights, freedom from violence and harassment, granting equal opportunities for recruitment, retention and promotion in employment and transforming the negative and harmful norms that limit women’s access to and condition of work and income generating opportunities, are crucial to the elimination of poverty.

Mahatma Gandhi spoke about how poverty is the worst form of violence, that it robs human beings of their essential dignity, self-respect and human rights and how it is one of the products of the cruelties and injustices of our social system.

For most of the poor who are women and girls, this violence, cruelty and injustice is both a product of, and reinforces the injustice of gender inequality, discrimination and violence against women and girls. To root out poverty we must root out gender injustice in all its forms. A planet 50/50 by 2030 will also ensure a sustainable, prosperous and peaceful planet without poverty.

The post Women: Major Drivers & Beneficiaries of Poverty Eradication appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/women-major-drivers-beneficiaries-poverty-eradication/feed/ 0
International Day of Rural Womenhttp://www.ipsnews.net/2017/10/international-day-rural-women/?utm_source=rss&utm_medium=rss&utm_campaign=international-day-rural-women http://www.ipsnews.net/2017/10/international-day-rural-women/#respond Mon, 16 Oct 2017 20:57:49 +0000 Michel Mordasini http://www.ipsnews.net/?p=152524
Michel Mordasini, is Vice President of the International Fund for Agricultural Development - IFAD

The post International Day of Rural Women appeared first on Inter Press Service.

]]>

Michel Mordasini, is Vice President of the International Fund for Agricultural Development - IFAD

By Michel Mordasini
ROME, Oct 16 2017 (IPS)

On this International Day of Rural Women, the world celebrates women and girls in rural areas and the critical role they play in enhancing agricultural and rural development, improving food security and eradicating rural poverty.

Michel Mordasini. Credit: IFAD

To increase the impact of IFAD-supported projects on gender equality and to strengthen women’s empowerment in poor rural areas, our approach is centered on three pillars, which are the strategic objectives of our Policy on Gender Equality and Women’s Empowerment:

First, we promote economic empowerment to enable rural women and men to have equal opportunities to participate in, and benefit from, profitable economic activities. To do this, we need to ensure that women have equal access to land and other productive resources and inputs, to knowledge, financial services and markets, and to income-generation opportunities.

Second, we enable women and men to have equal voice and influence in rural institutions and organizations. To this end, we support women’s self-organization in women’s groups and their participation in farmer organizations, water user associations, cooperatives and many other rural institutions. We set quotas for women’s representation and train women in leadership.

Third, we strive to promote a more equitable balance in workloads and in the sharing of economic and social benefits between women and men. Infrastructure development, and access to water, energy, roads and transport all contribute to reducing women’s burden of work, thus enabling them to take on economic activities and decision-making roles.

At IFAD, we celebrate the 2017 International Day of Rural Women by honouring the best-performing project in each region that empowers women and addresses gender inequalities. The Gender Award was established to recognize the efforts and achievements of IFAD-supported projects in meeting the strategic objectives of IFAD’s Policy on Gender Equality and Women’s Empowerment. The Award gives visibility to those projects that have successfully reduced rural women’s workload, given them a voice and created opportunities for economic empowerment. While selecting the winning projects, we also evaluate the strategic guidance provided by the project management unit and the achievements of gender focal points. We pay particular attention to innovative and gender transformative approaches that address underlying inequalities.

This year the Gender Awards go to the following projects:

The Char Development and Settlement Project – Phase IV in Bangladesh. The project is improving livelihoods for poor people living on newly accreted coastal islands known locally as chars. It uses a combined approach to development, which includes infrastructure works, forestry, water supplies, provision of health and sanitation, management of land and agriculture, securing women’s and men’s access to land and addressing social norms such as child marriage.

The Agricultural Value Chain Development Project in the Mountain Zones of Al-Haouz Province in Morocco. The project is supporting smallholder farmers and livestock producers, and promoting the development of value chains for olives, apples and lamb. With access to subsidies and credit, women have formed professional teams and associations, and cooperatives for income-generation.

The Building Rural Entrepreneurial Capacities: Trust and Opportunity Programme in Colombia. The programme is helping rural communities to recover from conflict. It is improving living conditions, income and employment for small farmers, indigenous groups, Afro-Latino communities, young people, families who have been forcibly displaced and households headed by women in post-conflict rural areas.

The Rural Markets Promotion Programme in Mozambique. The programme is enabling small-scale farmers to increase their incomes and helping them to market their surpluses. Women are learning to read and write, and benefiting from community-based financial services. The programme has achieved transformative changes, including greater involvement of men in activities related to nutrition.

The Poverty Reduction Project in Aftout South and Karakorum – Phase II in Mauritania. The project is improving the income and living conditions of poor rural households in M’Bout, Kankossa and Ould-Yengé. With a female gender officer and an actionable gender strategy, the project has invested in information dissemination and sensitization on gender equality and equitable workloads, and the importance of healthcare and sanitation, water supplies and access to markets.

Let me congratulate the winners. IFAD President and staff look forward to welcoming them to Rome on 29-30 November for the award ceremony and a learning event.

The hundreds of thousands of poor households targeted in these five projects have made considerable progress in reducing rural poverty and empowering women. Let us continue to ensure that poor rural communities and individuals – particularly women, indigenous peoples and young people – become part of a rural transformation that drives overall sustainable development and leaves no one behind. IFAD aims to achieve real transformative gender impact. And to do this, we need to address the deep roots of gender inequality – prevailing social norms, entrenched attitudes and behaviours, and social systems.

The post International Day of Rural Women appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/international-day-rural-women/feed/ 0
Can the Kenyan Lion Kick High Enough to Be the South Korean Tiger of Africa?http://www.ipsnews.net/2017/10/can-kenyan-lion-kick-high-enough-south-korean-tiger-africa/?utm_source=rss&utm_medium=rss&utm_campaign=can-kenyan-lion-kick-high-enough-south-korean-tiger-africa http://www.ipsnews.net/2017/10/can-kenyan-lion-kick-high-enough-south-korean-tiger-africa/#respond Mon, 16 Oct 2017 11:52:14 +0000 Mary Kawar and Siddharth Chatterjee http://www.ipsnews.net/?p=152505 Dr Mary Kawar is Country Director of the ILO for Tanzania, Kenya, Uganda, Rwanda and Burundi. Follow her on twitter: @mary_kawar

Mr Siddharth Chatterjee is the UN Resident Coordinator to Kenya. Follow him on twitter: @sidchat1

The post Can the Kenyan Lion Kick High Enough to Be the South Korean Tiger of Africa? appeared first on Inter Press Service.

]]>

Taekwondo a Korean martial art also practiced in Kenya. Credit: Capital FM

By Mary Kawar and Siddharth Chatterjee
NAIROBI, Kenya, Oct 16 2017 (IPS)

In 1953 South Korea emerged from the ravages of a debilitating war, yet the total gross domestic product in nominal terms has surged 31,000 fold since 1953.

Consider this: in 1950 the Gross Domestic Product (GDP) per capita of South Korea was US$ 876 and Kenya’s was US$ 947. In 2016, the GDP per capita of South Korea rose to US$ 27,539 and Kenya’s to US$ 1,455.

South Korea over the past four decades has demonstrated incredible economic growth and global integration to become a high-tech industrialized economy. In the 1960s, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion-dollar club of world economies.

In South Korea the Gini coefficient is 0.30 (extent of inequality) whereas in Kenya it is much higher at 0.45. Despite posting some of the highest GDP growth rates globally, countries in Africa continue to have the worst poverty and unemployment rates, with Kenya being one of those countries where the gap between rich and poor is widening.

While the majority of these Kenyans are occupied in the agricultural industry, technology advances and the rising prominence of the service industry is threatening to render many of these superfluous unless urgent shifts in growth models are undertaken to create quality jobs.

Lessons from economic structural transformation abound especially from the Asian tigers. Once an agricultural country like Kenya, South Korea spent much of the 20th century driving modern technologies and is now regarded as one of Asia’s most advanced economies. Among the focus areas for the country were facilitating industrialization, high household savings rates, high literacy rates and low fertility rates.

What South Korea achieved was fast economic growth underpinned by a strong industrial base that led to full employment and higher real wages. When the 1997 financial crisis threatened employment and welfare of its citizens in 1997, the country engaged in ambitious structural adjustment that introduced social protection measures for workers, the unemployed and poor people, in addition to reigniting the drivers of growth.

The international experience suggests that, for a given increase in the labor force, GDP growth should be at least double that rate to prevent unemployment from rising, and even higher if unemployment is to be reduced. With Kenya’s labor force growing at 3 percent corresponding to one million youth entering the job market each year, GDP should keep growing at 6 percent.

But this may not be enough as there is a lot of slack in the labor market to be absorbed. Kenya has one of the highest informal sector employment rates in the continent. With about three out of four workers employed in casual jobs whose key features include unpredictable incomes, poor working conditions and low productivity.

According to the latest data from the Kenya National Bureau of Statistics (KNBS), employment in the informal economy has grown much faster than in the formal economy, rising by nearly 4 million versus 60,000 since 2009, with the corresponding share of the formal economy in total employment shrinking to 17 percent from 19 percent.

Income inequality remains a challenge in Kenya, with the highest 10 percent earning almost 15 times higher than the lowest 10 percent, which is double of that in South Korea.

There are grounds for optimism, as Kenya seeks to move from being a regional leader to local innovator. In August 2016, Kenya hosted the Sixth Tokyo International Conference on African Development (TICAD), which was the first on African soil. Kenya is also developing policy and institutional reforms to increase export through better trade logistics and greater regional integration.

Kenya Bureau of Standards (KEBS) and Korean Agency for Technology and Standards (KATS) have signed a Memorandum of Understanding (MOU) to boost standardization activities between the two countries. Credit: Citizen TV


In addition, Kenya’s internet prices are low at half of even lower than those in neighboring countries. Innovations in mobile phone-based banking and related technological platforms have resulted in more financial inclusion that has reached 75 percent of the population. A large population of educated youth is already employed in these areas that have high job creation potential.

Kenya’s policies will need to consider the effects of technological innovations on the labor market and their socioeconomic impact. Household incomes improve when the largest number of people get involved in technology-based productive work. Even agriculture needs to be high-tech and include agro-processing.

Underlying this is the ability of the education and training system to adapt and promote the creation of a sustainable and inclusive economy. Kenya’s policies will therefore need to assess the effects of technological innovations on the labor market and their socioeconomic impact.

Kenya is moving ahead on education with its more than 1000 post-secondary institutions, 22 public and more than 30 private universities that produce the largest numbers of highly trained and skilled persons in the East African Community.

However, Kenya has substantial disparities in access to education. According to the Kenya National Bureau of Statistics, children in capital city Nairobi have about 15 times more access to secondary education than those living in Turkana, one of the poorest counties.

In addition to education, that increases employability on the labor supply side but does not in itself create jobs, more emphasis should be given to policies that increase labor demand. With an increasing youthful population, Kenya faces a window of demographic opportunity not only numerically.

Today’s youth are more educated than their parents and are “waiting in the wings”, not yet active but ready and willing to do so. But for this to happen and thus reduce youth and educated unemployment, there is a need to ensure that there are enough opportunities for them to participate actively in the economy and society.

Unfortunately, about 43 percent of Kenya’s youth are currently either unemployed or working yet living in poverty. Not unrelated to the few employment opportunities at home, many job seekers emigrate. The International Organization of Migration (IOM) reports for Kenya a skilled emigration rate of 35 per cent reaching 51 percent among health professionals. These rates are among the highest in the world. A continued lack of decent work opportunities as a result of insufficient or misapplied investments can perpetuate, if not increase, emigration and lead to an erosion of the basic social contract underlying democratic societies.

Still within the area of labor markets, good governance is critical for linking employment growth to decent employment creation. A recent meeting on the Future of Work organized by the Ministry of Labour, the Kenya Federation of Employers and the Kenya Federation of Trade unions in collaboration with the International Labour Organization discussed the implications for the 4th industrial revolution and its impact on Kenya. The discussion confirmed that laws, policies and institutions can be improved through social dialogue that would also include the informal sector.

For women, access to family planning and maternal health services – as well as education for girls is the best bet for improved economic opportunity. Global data shows that the highest benefits from reducing unintended pregnancies would accrue to the poorest countries, with GDP increases ranging from one to eight percent by 2035. There are few interventions that would give as wide-reaching impacts.

Finally, Kenya would need to address the rural/urban divide. Urban population growth is naturally fueled from growth in the population already living in cities but in Kenya, more than in many other African countries, urban growth comes from significant internal migration. This suggests that the country side is becoming increasingly less attractive. The share of population living in slums remains high at 55 percent with no discernible decline since 1990.

In conclusion, increases in real wages and decent employment creation will remain elusive as long as growth is not inclusive while educated job seekers are not employed in sectors that require new skills. The shifting population of Kenya provides many opportunities for growth. With a median age of 18, investing in Kenya’s youth would reap a demographic dividend. Key investments have to be in education and skills, empowerment of women and girls, a Marshal plan of employment and equity. These would help accelerate Kenya’ march to prosperity and help end poverty.

When this happens, Kenya will increase its ability to introduce more comprehensive and effective social protection policies that would add to the income security provided by decent employment. And unlike South Korea, Kenya should not wait to do so after a financial crisis.

The post Can the Kenyan Lion Kick High Enough to Be the South Korean Tiger of Africa? appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/can-kenyan-lion-kick-high-enough-south-korean-tiger-africa/feed/ 0
Hunger in Africa, Land of Plentyhttp://www.ipsnews.net/2017/10/hunger-africa-land-plenty/?utm_source=rss&utm_medium=rss&utm_campaign=hunger-africa-land-plenty http://www.ipsnews.net/2017/10/hunger-africa-land-plenty/#comments Sat, 14 Oct 2017 23:45:22 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=152493 Anis Chowdhury, a former professor of economics at the University of Western Sydney, held senior United Nations positions during 2008–2015 in New York and Bangkok. Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

The post Hunger in Africa, Land of Plenty appeared first on Inter Press Service.

]]>

A tea farmer in Nyeri County, central Kenya contemplates what to do after his crop was damaged by severe weather patterns. Credit: Miriam Gathigah/IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Oct 14 2017 (IPS)

Globally, 108 million people faced food crises in 2016, compared to about 80 million in 2015 – an increase of 35%, according to the 2017 Global Report on Food Crises. Another 123 million people were ‘stressed’, contributing to around 230 million such food insecure people in 2016, of whom 72% were in Africa.

The highest hunger levels are in Sub-Saharan Africa (SSA) according to the Global Hunger Index 2016. The number of ‘undernourished’ or hungry people in Africa increased from about 182 million in the early 1990s to around 233 million in 2016 according to the FAO, while the global number declined from about a billion to approximately 795 million.

This is a cruel irony as many countries in Africa have the highest proportion of potential arable land. According to a 2012 FAO report, for African sub-regions except North Africa, between 21% and 37% of their land area face few climate, soil or terrain constraints to rain-fed crop production.

Why hunger?
Observers typically blame higher population growth, natural calamities and conflicts for hunger on the continent. And since Africa was transformed from a net food exporter into a net food importer in the 1980s despite its vast agricultural potential, international food price hikes have also contributed to African hunger.

The international sovereign debt crises of the 1980s forced many African countries to the stabilization and structural adjustment programmes (SAPs) of the Bretton Woods institutions. Between 1980 and 2007, Africa’s total net food imports grew at an average of 3.4% per year in real terms. Imports of basic foodstuffs, especially cereals, have risen sharply.

One casualty of SAPs was public investment. African countries were told that they need not invest in agriculture as imports would be cheaper. . Tragically, while Africa deindustrialized thanks to the SAPs, food security also suffered.

In 1980, Africa’s agricultural investments were comparable to those in Latin America and Caribbean (LAC). But while LAC agricultural investment increased 2.6 fold between 1980 and 2007, it increased by much less in Africa. Meanwhile, agricultural investments in Asia went from three to eight times more than in Africa as African government investments in agricultural research remained paltry.

Thus, African agricultural productivity has not only suffered, but also African agriculture remains less resilient to climate change and extreme weather conditions. Africa is now comparable to Haiti where food agriculture was destroyed by subsidized food imports from the US and Europe, as admitted by President Clinton after Haiti’s devastating 2010 earthquake.

Lost decades
SAP advocates promised that private investment and exports would soon follow cuts in public investment, thus paying for imports. But the ostensibly short-term pain of adjustment did not bring the anticipated long-term gains of growth and prosperity. Now, it is admitted that ‘neoliberalism’ was ‘oversold’, causing the 1980s and 1990s to become ‘lost decades’ for Africa.

Thanks to such programmes, even in different guises such as the Poverty Reduction Strategy Papers (PRSPs), Africa became the only continent to see a massive increase in poverty by the end of the 20th century. And despite the minerals-led growth boom for a dozen years (2002-2014) during the 15 years of the Millennium Development Goals, nearly half the continent’s population now lives in poverty.

The World Bank’s Poverty in Rising Africa shows that the number of Africans in extreme poverty increased by more than 100 million between 1990 and 2012 to about 330 million. It projects that “the world’s extreme poor will be increasingly concentrated in Africa”.

Land grabs
Despite its potential, vast tracts of arable land remain idle, due to decades of official neglect of agriculture. More recently, international financial institutions and many donors have been advocating large-scale foreign investment. A World Bank report notes the growing demand for farmland, especially following the 2007-2008 food price hikes. Approximately 56 million hectares worth of large-scale farmland deals were announced in 2009, compared to less than four million hectares yearly before 2008. More than 70% of these deals involved Africa.

In most such deals, local community concerns are often ignored to benefit big investors and their allies in government. For example, Feronia Inc – a company based in Canada and owned by the development finance institutions of various European governments – controls 120,000 hectares of oil palm plantations in the Democratic Republic of Congo.

Advocates of large-scale land acquisitions claim that such deals have positive impacts, e.g., generating jobs locally and improving access to infrastructure. However, loss of community access to land and other natural resources, increased conflicts over livelihoods and greater inequality are among some common adverse consequences.

Most such deals involve land already cleared, with varied, but nonetheless considerable socioeconomic and environmental implications. Local agrarian populations have often been dispossessed with little consultation or adequate compensation, as in Tanzania, when Swedish-based Agro EcoEnergy acquired 20,000 hectares for a sugarcane plantation and ethanol production.

Land grabbing by foreign companies for commercial farming in Africa is threatening smallholder agricultural productivity, vital for reducing poverty and hunger on the continent. In the process, they have been marginalizing local communities, particularly ‘indigenous’ populations, and compromising food security.

This article is part of a series of stories and op-eds launched by IPS on the occasion of this year’s World Food Day on October 16.

The post Hunger in Africa, Land of Plenty appeared first on Inter Press Service.

]]>
http://www.ipsnews.net/2017/10/hunger-africa-land-plenty/feed/ 1