Inter Press ServiceTrade & Investment – Inter Press Service http://www.ipsnews.net News and Views from the Global South Mon, 16 Oct 2017 21:29:48 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.2 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

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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.

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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

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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.

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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.

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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.

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World Bank Must Stop Encouraging Harmful Tax Competitionhttp://www.ipsnews.net/2017/10/world-bank-must-stop-encouraging-harmful-tax-competition-2/?utm_source=rss&utm_medium=rss&utm_campaign=world-bank-must-stop-encouraging-harmful-tax-competition-2 http://www.ipsnews.net/2017/10/world-bank-must-stop-encouraging-harmful-tax-competition-2/#comments Tue, 10 Oct 2017 18:29:38 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=152413 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.

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Instead of encouraging tax competition, the World Bank should help developing countries improve tax administration to enhance collection and compliance, and to reduce evasion and avoidance. Credit: IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Oct 10 2017 (IPS)

One of the 11 areas that the World Bank’s Doing Business (DB) report includes in ranking a country’s business environment is paying taxes. The background study for DB 2017, Paying Taxes 2016 claims that its emphasis is “on efficient tax compliance and straightforward tax regimes”.

Its ostensible aim is to aid developing countries in enhancing the administrative capacities of tax authorities as well as reducing informal economic activities and corruption, while promoting growth and investment. All well and good, until we get into the details.

Tax less
First, the Report advocates not only administrative efficiency, but also lower tax rates. Any country that reduces tax rates, or raises the threshold for taxable income, or provides exemptions, gets approval.

Second, it exaggerates the tax burden by including, for example, employees’ health insurance and pensions and charges for public services like waste collection and infrastructure or environmental levies that the businesses must pay. The IMF’s Government Financial Statistics Manual correctly treats these separately from general tax revenues.

Third, by favourably viewing countries that lower corporate tax rates (or increase threshold and exemptions) and negatively considering those that introduce new taxes, DB is essentially encouraging tax competition among developing countries.

Thus, the Bank is ignoring research at the OECD and IMF which has not found any convincing evidence that lower corporate tax rates or other fiscal concessions have any positive impact on foreign direct investment.

Instead, they found net adverse impacts of tax concessions and fiscal incentives on government revenues. According to the research, factors such as the availability and quality of infrastructure and human resources were more important for investment decisions than taxes.

Moreover, the World Bank’s Enterprise Surveys do not find paying taxes to be high on the list of factors that enterprise owners perceive as important barriers to investment. For example, the Enterprise Survey for the Middle East and North Africa found political instability, corruption, unreliable electricity supply, and inadequate access to finance to be important considerations; paying taxes or tax rates were not.

Yet, the World Bank has been promoting tax cuts and tax competition as magic bullets to boost investment. Not surprisingly, thanks to its still considerable influence, tax revenues in developing countries are not rising enough, or worse, continue to fall. According to some estimates, between 1990 and 2001, reduction in corporate taxes lowered countries’ tax revenue by nearly 20%.

Instead of encouraging tax competition, therefore, the World Bank should help developing countries improve tax administration to enhance collection and compliance, and to reduce evasion and avoidance. According to OECD Secretary-General Angel Gurria, “developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid”.

Global Financial Integrity has estimated that illicit financial flows of potentially taxable resources out of developing countries was US$7.85 trillion during 2004-2013 and US$1.1 trillion in 2013 alone!

Conflicts of interest
But the Bank’s Paying Taxes and DB reports do little to strengthen developing countries’ tax revenues. This should come as no surprise as its partner for the former study is Pricewaterhouse Cooper (PwC), one of the ‘Big Four’ leading international accounting and consultancy firms. PwC competes with KPMG, Ernst & Young and Deloitte for the lucrative business of helping clients minimize their tax liabilities. PwC assisted its clients in obtaining at least 548 tax rulings in Luxembourg between 2002 and 2010, enabling them to avoid corporate income tax elsewhere.

How are developing countries expected to finance their infrastructure investment needs, increase social protection coverage, or repair their damaged environments? Instead of helping, the Bank’s most influential report urges them to cut corporate tax rates and social contributions to improve their DB ranking, contrary to what then Bank Chief Economist Kaushik Basu observed: “Raising [tax] allows developing countries to invest in education, health and infrastructure, and, hence, in promoting growth.”

How are they supposed to achieve the internationally agreed Agenda 2030 for the Sustainable Development Goals in the face of dwindling foreign aid. After all, only a few donor countries have fulfilled their aid commitment of 0.7% of GNI, agreed to almost half a century ago. Since the 2008 financial crisis, overseas development assistance has been hard hit by fiscal austerity cuts in OECD economies except in the UK under Cameron.

The Bank would probably recommend public-private partnerships (PPPs) and borrowing from it. Countries starved of their own funds would have to borrow from the Bank, but loans need to be repaid.

Governments lacking their own resources are being advised to rely on PPPs, despite predictable welfare outcomes – e.g., reduced equity and access due to higher user fees – and higher government contingent fiscal liabilities due to revenue guarantees and implicit subsidies.

Financially starved governments boost Bank lending while PPPs increase the role of its International Finance Corporation (IFC) in promoting private sector business. Realizing the Bank’s conflict of interest, many middle-income countries ignore Bank advice and seek to finance their investments and other activities by other means. Thus, there are now growing demands that the Bank stop promoting tax competition, deregulation and the rest of the Washington Consensus agenda.

Bank must support SDGs
However, nothing guarantees that the Bank will act accordingly. It has already ignored the recommendation of its independent panel to stop its misleading DB country rankings. While giving lip service to the International Labour Organization (ILO) and others who have asked it to stop ranking countries by labour market flexibility, the Bank continues to promote labour market deregulation by other means.

If the Bank is serious about being a partner in achieving Agenda 2030, it should align its work accordingly, and support UN leadership on international tax cooperation besides enhancing governments’ ability to tax adequately, efficiently and equitably. In the meantime, the best option for developing countries is to ignore the Bank’s DB and Paying Taxes reports.

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Ghana Aims to Regain Top Spot in Cocoa Productionhttp://www.ipsnews.net/2017/10/ghana-aims-regain-top-spot-cocoa-production/?utm_source=rss&utm_medium=rss&utm_campaign=ghana-aims-regain-top-spot-cocoa-production http://www.ipsnews.net/2017/10/ghana-aims-regain-top-spot-cocoa-production/#respond Thu, 05 Oct 2017 12:03:16 +0000 Kwaku Botwe http://www.ipsnews.net/?p=152368 Ghana is home to the world’s favourite cocoa beans. They’re bigger in size, have a higher butter content and superior flavour – all qualities which make Ghana’s cocoa the world standard against which all cocoa is measured. But while cocoa used to be the biggest foreign exchange earner for the West African country, contributing about […]

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Professor of Food Science and Technology at the University of Ghana, Emmanuel Afoakwa, and other researchers at a cocoa farm. Credit: Kwaku Botwe/IPS

Professor of Food Science and Technology at the University of Ghana, Emmanuel Afoakwa, and other researchers at a cocoa farm. Credit: Kwaku Botwe/IPS

By Kwaku Botwe
ACCRA, Oct 5 2017 (IPS)

Ghana is home to the world’s favourite cocoa beans. They’re bigger in size, have a higher butter content and superior flavour – all qualities which make Ghana’s cocoa the world standard against which all cocoa is measured.

But while cocoa used to be the biggest foreign exchange earner for the West African country, contributing about 45 percent of the total foreign exchange earnings, now the commodity barely provides 25 percent.“They [farmers who sell their lands] don’t know what they are doing because cocoa is a legacy that can be left to children, unlike one-time cash.” --Nana Kwasi Ofori of the Cocoa Farmers Association

Farmers in Ghana follow a strict routine in the planting, harvesting and drying of cocoa, supported and monitored by the government regulator, the Ghana Cocoa Board.

They employ natural drying of the beans in the sun (instead of heating), turning the beans at regular intervals for not less than a week. This natural and painstaking means of drying ensures the beans turn out their characteristic golden brown. The layers of monitoring at the time of purchase are all part of government’s intervention.

The country is the second biggest supplier of cocoa worldwide, beaten only by its West African neighbour, Cote D’Ivoire. But Ghana was once the world champion. It lost the first spot to its neighbour in the 1970s after government reduced the price given to farmers, thereby discouraging many from going into the venture.

Exchanging Golden Pods for Golden Nuggets

Several factors have contributed to the shortfall. Distribution of free or subsidized farm inputs such as fertilizers or chemicals have been fraught with several challenges.

“Not all of us were given the free fertilizers. And they were politicizing it. Someone with a small farm of four acres could be given 50 bags of fertilizer while others with very big farms were given less,” Abusuapanyin Kwabena Amankwaa, a cocoa farmer, told IPS.

Central Regional Chief Cocoa Farmer Nana Kwasi Ofori also said that “farmers who are not cultivating cocoa were given some of the inputs”.

CEO of the Cocoa Board Joseph Baidoo has said his interactions with farmers revealed that Ghana’s fertilizers – which are not supposed to be for sale – were in fact being sold in Nigeria, Gabon and other neighbouring African countries, adding that this meant the free fertilizers were given to political party loyalists who were not cocoa farmers.

Diseases such as black pod, swollen shoot, and capsids have had a field day as a result.

The new government decided to discontinue the free fertilizer programme following what it says were complaints from farmers. Instead, it wants to sell the fertilizer at subsidized prices.

Ghana has an annual cocoa production target of one million tonnes. That target was achieved in 2011. Since then government has struggled to maintain the target, with annual production hovering around 800,000 tonnes.

In previous years, government decided to absorb the cost and technical assistance needed to apply the right chemicals and fertilizers to cocoa farms nationwide – initiatives called the Mass Spraying Exercise and the Hi-tech Programme, respectively.

Government also created the Rehabilitation Programme where old, less productive trees were felled and replaced with new, more-yielding hybrid seedlings for free. This saw a big dividend in cocoa bean output, with the country recording its highest cocoa output of over 1 million tonnes in 2011. But government has not been able to sustain the programme.

Probably the biggest threat to hit the cocoa industry in recent times is illegal mining, locally called galamsey. The upsurge in the search for gold between 2012 and 2016 has threatened the livelihoods of several cocoa farmers as galamsey takes over cocoa farms.

“Some chiefs are part of the problem which we are facing. They sell the land to the miners and collect the money so sometimes farmers are not even compensated,” said Nana Kwasi Ofori, an executive member of the Cocoa Farmers Association.

Most farmers are tenant farmers who work on lands owned by chiefs or families. Fifty-three-year-old Adwoa Oforiwaa, a cocoa farmer in the Central Region, says she was only given 500 cedis (about 112 dollars) as compensation when galamsey operators took over a good part of her farm.

“When they [galamsey operators] come, they tell you they have orders from the chiefs or even government, and they start the destruction,” she added.

A journalist in the Western Region – the leading cocoa-producing region in Ghana – Yaw Obrempong says some farmers willingly sell off their cocoa farms for ready cash.

“If the galamsey operator is here with a bag full of cash, why won’t I sell my land instead of staying in a queue for over two weeks only to be given a bag of fertilizer?” Obrempong noted.

He says some farmers claim they had to pay bribes in order to get farm inputs from the government. Other farmers sold their lands when the much-needed labour to work on the cocoa farms shifted into illegal mining.

But Nana Kwasi Ofori says, “They [farmers who sell their lands] don’t know what they are doing because cocoa is a legacy that can be left to children, unlike one-time cash.”

The galamsey invasion has affected a good part of the 1.7 million hectares of cocoa farms in the country.  The Government has launched an anti-galamsey crusade to flush out illegal miners. With the help of a taskforce including the military, several arrests and confiscation of galamsey equipment have been carried out.

The launch of the Media Coalition against Galamsey has also given government a shot in the arm. Government has moved the crusade a notch higher with the announcement by the Ministry of Lands and Natural Resources of its intention to procure drones at the cost of 3 million dollars for surveillance.

Guaranteed Pricing

Nonetheless, cocoa remains the most important economic crop for Ghana, raking in about 2 billion dollars annually, contributing to some 4.22 percent of the country’s GDP.  Such a feat has been achieved through government interventions such as price stability. For instance, the world price of cocoa beans has plummeted from about 3,122 dollars per tonne last year to about 1,900 dollars this year, yet the Cocoa Board maintained s producer price of 7,600 cedis per tonne (1,700 dollars).

The Board is able to cushion farmers with a Stabilization Fund established some ten years ago, as well as other sources of funds. This presents a big advantage for cocoa farmers in Ghana over other cocoa-producing countries on the continent this year.

For instance, the Ivorian government has slashed the prices of cocoa almost by a third, to 700 CFA per kg (about 1,300 dollars per tonne). Some Ghanaians have expressed concern that the development is likely to reverse the dreaded cross-border smuggling of cocoa (Ghana has in the past seen a lot of its cocoa smuggled to their neighbor countries because of price differences).

But professor of Food Science and Technology at the University of Ghana, Emmanuel Afoakwa says “it is not likely because Ghana is bent on protecting its premium quality and so there is tight security to ensure cocoa does not move from Cote D’Ivoire and other countries into the country”.

He adds that “farmers must cherish that government is interested in their welfare because government now loses about 500 dollars on every tonne of cocoa bought from them”.

The Ghana Cocoa Board also has an arrangement to pay for the felling and replanting of old and diseased cocoa trees. The board has announced that it will be giving away about 60 million seedlings to farmers for replanting. The exercise, called rehabilitation, is meant to boost output.

The Government also has a programme to woo youth into the sector to replace aging cocoa farmers. The Board is providing support for all young cocoa farmers by giving them hybrid pods, improved seedlings, free fertilizer and inputs, a farmer business school programme, as well as extension support to boost cocoa production. Cocoa farmers are also pushing for a Cocoa Farmers Pension Scheme which they believe will help attract the youth.

Cocoa Processing

To maximize revenue from cocoa, the government has its eyes on adding value to the cocoa it exports. The global cocoa market has an estimated value of 9 billion dollars for unprocessed cocoa beans, about 28 billion dollars for semi-processed/intermediate products and a whopping 87 billion dollars for fully processed/final products. In an attempt to get its share of the 87-billion-dollar cake, government has set a target of processing 50 percent of its exported cocoa.

Currently, the seven processing companies operating at various levels of value-addition process about 25 percent of the county’s exported cocoa. But most of the processed cocoa are exported in semi-processed form of cocoa paste.

Prof. Afoakwa says the huge capital requirement involved in processing cocoa into finished products fit for export could be a big hurdle for Ghana. Moreover, there are high tariff walls with regards to the export of processed products. For example, the European Union levies no duties on the import of raw cocoa beans, but levies a 7.7 percent and 15 percent duty on cocoa powder and cocoa cake, respectively.

He believes heightening the campaign on the consumption of cocoa products would be one way of tackling the issue.

“I’m working with Ghana Cocoa Board to conduct the cocoa product processing competition and we are bringing together ten different polytechnic institutions to develop new products using cocoa. We are going to invite high schools to come witness it. What we are trying to do is to advocate for higher consumption of cocoa products and this can be done when we know the kind of different products that we can make out of cocoa,” he added.

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Greater Cooperation To Strengthen Taxationhttp://www.ipsnews.net/2017/10/greater-cooperation-strengthen-taxation/?utm_source=rss&utm_medium=rss&utm_campaign=greater-cooperation-strengthen-taxation http://www.ipsnews.net/2017/10/greater-cooperation-strengthen-taxation/#respond Tue, 03 Oct 2017 10:25:09 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=152323 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.

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Many tax avoidance schemes are not illegal. But just because it is not illegal does not mean it is not a form of abuse, fraud or corruption. Credit: Servaas van den Bosch/IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Oct 3 2017 (IPS)

Since the 1950s, there has been a popular dance called the ‘limbo rock’, with the winner leaning back as much as possible to get under the bar. Many of today’s financial centres are involved in a similar game to attract customers by offering low tax rates and banking secrecy.

How Low Can You Go?
This has, in turn, forced many governments to lower direct taxes not only on income, but also on wealth. From the early 1980s, this was dignified by US President Ronald Reagan’s embrace of Professor Arthur Laffer’s curve which claimed higher savings, investments and growth with less taxes.

Following a long hiatus, Laffer is now making a comeback with the recent election of Donald Trump who has espoused a similar claim that lower taxes will lead to higher growth, lifting all American boats. It remains to be seen how President Trump will reconcile this with his promise to build and improve infrastructure in the US, which many hope will finally create the basis for the long awaited recovery following the 2008 financial crisis and the ensuing Great Recession.

With the decline of government revenue from direct taxes, especially income tax, following Laffer’s advice, many governments were forced to cut spending, often by reducing public services, raising user-fees and privatizing state-owned enterprises. Beyond a point, there seemed to be little room left for further cuts, while governments had to raise revenue to fund its functions.

Regression
This increasingly came from indirect taxes, especially on consumption, as trade taxes declined with trade liberalization. Many countries have since adopted value added taxation (VAT), touted in recent decades by the International Monetary Fund (IMF) and others as the superior form of taxation: after all, once the VAT system is functioning, raising rates is relatively easy.

Instead, a progressive tax system would seek to ensure that those with more ability to do so, would pay proportionately more tax than those with less ability to do so. Instead, tax systems have become increasingly regressive, with the growing middle class bearing the main tax burden.

Meanwhile, tax competition among developing countries has not only reduced tax revenue, but also made direct taxation less progressive, while the growth of VAT has made the overall impact of taxation more regressive as the rich pay proportionately less tax with all the loopholes available to them, both nationally and abroad. Although there are many reasons for income inequality, untaxed assets have undoubtedly also increased both wealth and income inequalities at both national and international levels.

After Panama

Following the Panama revelations, most Western government leaders have pledged tough action against tax evasion and avoidance, especially by those using developing country tax havens. In the face of continued failure to deliver on the almost half-century old United Nations commitment to provide aid to developing countries equivalent to 0.7 per cent of their national incomes, then OECD Development Assistance Committee (DAC) chair, Erik Solheim, proposed greater tax cooperation instead.

After all, many developing countries are not devoid of financial assets, but so much has been taken out and hidden by wealthy elites in private financial institutions, especially in ‘offshore’ tax havens.

But since most using tax havens seek assets in OECD countries, the Paris-based organization has historically focused efforts on very limited matters of concern to their members. Hence, they have blocked efforts to give the UN a stronger mandate to advance international cooperation on taxation, culminating in the modest Addis Ababa Action Agenda declared at the third UN Financing for Development conference in July 2015.

As major users of such facilities themselves, many developing country elites have been conspicuously silent in the face of the Panama revelations of what they have long enabled and practiced. After all, much of what is involved is publicly considered illicit, immoral, and even ‘sinful’, even if not illegal. As Warren Buffett and the group of ‘patriotic millionaires’ in the US have noted, the rich currently pay less in tax than most of their lowest paid employees.

Reversing the slide
Many tax avoidance schemes are not illegal. But just because it is not illegal does not mean it is not a form of abuse, fraud or corruption. To tackle the corruption at the heart of the global financial system, tax havens need to be shut down, not reformed. ‘On-shoring’ such funds, without prohibiting legitimate investments abroad, will ensure that future investment income will be subject to tax as in the US and Canada.

If not compromised by influential interests benefiting from such flows, responsible governments should seek to enact policies to:
• Detect and deter cross-border tax evasion;
• Improve transparency of transnational corporations;
• Curtail trade mis-invoicing;
• Strengthen anti-money laundering laws and enforcement; and
• Eliminate anonymous shell companies.

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Making an Economic Case for Climate Actionhttp://www.ipsnews.net/2017/10/making-economic-case-climate-action/?utm_source=rss&utm_medium=rss&utm_campaign=making-economic-case-climate-action http://www.ipsnews.net/2017/10/making-economic-case-climate-action/#comments Mon, 02 Oct 2017 15:16:58 +0000 Tharanga Yakupitiyage http://www.ipsnews.net/?p=152311 Having faced a year of record temperatures and devastating hurricanes, the United States stands more to lose if it doesn’t take steps to reduce the risk and impact of climate change, according to a new report. Launched by the Universal Ecological Fund, it details the costs of the U.S.’ climate inaction to the national economy […]

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Secretary-General Ban Ki-moon (left) receives the legal instruments for joining the Paris Agreement from Barack Obama, President of the United States, at a special ceremony held in Hangzhou, China. Credit: UN Photo/Eskinder Debebe

By Tharanga Yakupitiyage
UNITED NATIONS, Oct 2 2017 (IPS)

Having faced a year of record temperatures and devastating hurricanes, the United States stands more to lose if it doesn’t take steps to reduce the risk and impact of climate change, according to a new report.

Launched by the Universal Ecological Fund, it details the costs of the U.S.’ climate inaction to the national economy and public health and urges for policies to move the country towards a sustainable future.

“It’s not about ideology, it’s about good business sense,” the former president of the American Association for the Advancement of Science (AAAS) and the report’s co-author James McCarthy told IPS.

“Many people say that they will not have the discussion because they are not convinced of the science—well then, let’s just look at the economics, let’s look at what it is costing to not have that discussion,” he continued.

A Wake of Destruction

The U.S. is still reeling from an unprecedented month of three hurricanes and 76 wildfires, devastating landscapes from Puerto Rico to Washington.

Hurricane Maria alone left Puerto Rican residents without food, water, or electricity. Approximately 44 percent of the population lacks clean drinking water and just 11 out of 69 hospitals have fuel or power, pushing the island to the brink of a humanitarian crisis.

“This year was nothing like we’ve seen,” said McCarthy.

Though aid delivery is underway, the economic losses from not only Hurricane Maria, but also Hurricanes Harvey and Irma along with the wildfires that swept through the Western coast, are estimated to be the costliest weather events in U.S. history.

The report estimates a price-tag of nearly 300 billion dollars in damage, representing 70 percent of the costs of all 92 weather events in the last decade.

Since hurricane season is yet to end, more expensive and damaging storms may still be in the forecast.

According to the National Oceanic and Atmospheric Administration National Centers for Environmental Information, the number of extreme weather events that incurred at least one billion dollars in economic losses and damages have increased in the last decade by almost two and a half times.

Such losses will only rise as human-induced climate change continues, contributing to dry conditions favorable for more wildfires and warm oceans which lead to more intense storms and higher sea levels.

McCarthy, who is also an Oceanography Professor at Harvard University, told IPS that investments beyond creating hurricane-proof infrastructure are needed to counter such damage.

“Infrastructure is important, but everything we can do to reduce the intensity of these events, by slowing the rate of global warming, will make future infrastructure more likely to be effective,” he said.

An Unhealthy Dependence

Among the major drivers of climate change is the burning of fossil fuels which the U.S. continues to rely on to produce energy.

Coal, oil and natural gas—all of which are fossil fuels— currently account for over 80 percent of the primary energy generated and used in the North American nation. When such fossil fuels are burned, large amounts of carbon dioxide (CO2) are released to the atmosphere, contributing to rapid changes in the climate.

Though emissions regulations have reduced air pollution health damages by 35 percent, or nearly 67 billion dollars per year, burning fossil fuels still produces health costs that average 240 billion dollars every year.

If fossil fuels continue to be used, both economic losses and health costs are estimated to reach at least 360 billion dollars annually, or 55 percent of U.S.’ growth, over the next decade.

And the government won’t be footing the expensive bill, the report notes.

“Time after time, we are going to see the public bearing the costs…it becomes a personal burden for them,” McCarthy told IPS.

He highlighted the importance of the U.S. taking steps to transition from fossil fuels to renewable energy.

“To move people, literally and figuratively, into the future to be more healthy and more sustainable and a less expensive way of doing business just makes sense,” McCarthy said.

Not only will it provide sustainable clean electricity and reduce the rate of global warming, renewable energy also can add to the economy by producing jobs.

Clean energy already employs almost 2 million workers, and doubling solar and wind generation can create another 500,000 jobs.

In order to successfully transition to a low-carbon economy, investments are essential, some of which can potentially come from taxing carbon emissions, the report states. A carbon tax aims to reduce emissions and promote a more efficient use of energy, including the transition to electric cars.

According to the Intergovernmental Panel on Climate Change (IPCC), a tax on carbon emissions can potentially produce revenues of up to 200 billion dollars in the U.S. within the next decade.

The carbon tax has been a controversial policy, with some expressing concern that companies will simply shift the cost to the consumer by way of increasing the prices of gasoline and electricity.

However, McCarthy noted that the public already currently bears the burden in terms of damages from extreme weather events and unhealthy air expenses.

A Government Denial

Despite the evidence for climate change and the role of fossil fuels in driving such change, U.S. President Donald Trump has begun to unravel many essential environmental protections.

Not only did his administration announce the U.S. withdrawal from the landmark Paris Agreement, but it is currently working to dismantle the Clean Power Plan (CPP) which aims to reduce carbon pollution from power plants across the country.

The move is tied to President Trump’s repeated calls to renew investments in the coal industry, claiming that it will bring back jobs.

McCarthy said that these actions are not “borne out by the facts.”

“The notion that you will be able to return the U.S. to a coal economy—there is no evidence for that. And secondly, if you are going to create jobs, the sensible way to create them is in a forward-looking area such as renewable energy rather than the highly risky and repeated exposure of coal,” he told IPS.

In spite of a national strategy that may exacerbate climate change, McCarthy said that cities and states are taking the lead and will continue to move in the right direction regardless of bipartisan politics.

Iowa is the leading U.S. state in wind power with over 35 percent of its electricity generated from wind energy.

In Oklahoma, where U.S. Environmental Protection Agency (EPA) Administrator Scott Pruitt hails from, 25 percent of electricity comes from wind energy.

“When you look at a state like Iowa and see [their] electricity is coming from wind energy, it doesn’t say anything about the politics of Iowa—it says something about people being sensible about how they spend their money and what they invest in to get a particular product,” McCarthy said.

The U.S.’ reluctance to reduce greenhouse gas emissions not only impacts Americans, but also people around the world. Since the process of withdrawing from the Paris Agreement will take time, McCarthy expressed hope that the U.S. will change its course.

“We hope over that period of time that [President Trump] will see that this partnership has enormous value and not only what the U.S. is doing that affects the rest of the world but vice versa,” he said.

“We should find reason to join efforts with the community of nations that have recognized, much like what we try to say in this report, that if we don’t do something, these are going to be very expensive and, in some cases, life-threatening consequences of this sort of neglect,” McCarthy concluded.

The EPA is expected to release a revised version of the CPP in the coming weeks, and it is expected to be significantly weaker than the original.

Governments will be convening in Bonn, Germany for the UN’s Annual Climate Change Conference (COP23) in November to advance the implementation of the Paris Agreement. The focus will be on how to implement issues including emissions reductions, provision of finance, and technology.

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More Public Spending, Not Tax Cuts, for Sustainable, Inclusive Growthhttp://www.ipsnews.net/2017/09/public-spending-not-tax-cuts-sustainable-inclusive-growth/?utm_source=rss&utm_medium=rss&utm_campaign=public-spending-not-tax-cuts-sustainable-inclusive-growth http://www.ipsnews.net/2017/09/public-spending-not-tax-cuts-sustainable-inclusive-growth/#comments Tue, 26 Sep 2017 15:53:25 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=152243 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.

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Tax cuts do not magically improve economic growth. Instead, the government should focus on building more economic capacity with new investments in infrastructure, research and development (R&D), education, and anti-poverty programs. Credit: Amantha Perera/IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Sep 26 2017 (IPS)

The Trump administration’s promise to increase infrastructure spending should break the straightjacket the Republicans imposed on the Obama administration after capturing the US Congress in 2010. However, in proportionate terms, it falls far short of Roosevelt’s New Deal effort to revive the US economy in the 1930s.

To make matters worse, reducing budget deficits remains the main economic policy goal of all too many OECD governments. Governments tend to cut social spending if they can get away with it without paying too high a political price.

But OECD governments’ belief that social spending — on health, education, childcare, etc. — is growth inhibiting is sorely mistaken. There is, in fact, overwhelming evidence of a positive relationship between public social spending and growth.

Return of supply-side economics
The cornerstone of all too many OECD government policies is tax cuts, especially for business corporations, ostensibly so that they will invest more with their higher retained earnings. This policy is premised on the long-discredited ‘supply-side economics’ promoted by conservative economists led by Arthur Laffer, popular during the early Reagan-Thatcher era of the 1980s.

But in retrospect, it is clear that the tax cuts by the Reagan administration on high-income households and businesses failed to boost growth in the US. Harvard professor and National Bureau of Economic Research president emeritus Martin Feldstein, President Reagan’s former chief economist, and Douglas Elmendorf, the former Democrat-appointed Congressional Budget Office Director, have shown that the 1981 tax cuts had virtually no net impact on growth.

Similarly, the 2001 and 2003 Bush tax cuts on ordinary incomes, capital gains, dividends and estates also failed to stimulate much growth, if any. In both cases, growth mainly came from other expansionary policies.

The OECD and the IMF also both doubt that tax cuts significantly induce investments. Cross-country research has found no relationship between changes in the top marginal tax rates and economic growth between 1960 and 2010. During this half-century period, although the US cut its top tax rate by over 40 percentage points, it only grew by just over two percent per annum on average. In contrast, Germany and Denmark, which barely changed their top rates at all, experienced similar growth rates.

Thus, tax cuts do not magically improve economic growth. Instead, the government should focus on building more economic capacity with new investments in infrastructure, research and development (R&D), education, and anti-poverty programs. As the IMF’s 2014 World Economic Outlook showed, the impacts of public investment are greatest during periods of low growth.

Social spending for economic recovery
Effective social programs provide immediate benefits to low-income families, enhancing long-term economic growth prospects. Increased income security improves health and increases university enrolment, leading to higher productivity and earnings.

Similarly, nutrition assistance programs improve beneficiaries’ health and cognitive capacities while housing assistance programs have other positive impacts. Investments in education result in a more skilled workforce, raising productivity and earnings as well as spurring innovation. Extra years of schooling are correlated with significant per capita income increases.

Investments in early childhood, including health and education, also enhance economic benefits. The earlier the interventions, the more cost-effective they tend to be; hence, OECD policymakers now promote preschool childcare and education.

Children enjoying early high-quality care and education programs are less likely to engage in criminal behaviour later in life; they are also more likely to graduate from secondary school and university. Reducing preschool costs also effectively raise mothers’ net incomes, inducing them to return to employment.

But the revenue boost from greater growth and productivity due to such social programs may not be enough to prevent rising deficits or debt. However, there are many ways to deal with revenue shortfalls, including new taxes as well as better regulations and enforcement to stem tax evasion. Progressive social protection programs and universal health care provisioning also help improve equity.

The ‘cure’ is the problem
This is not the time to reduce public debt through damaging cuts to social programs when most OECD economies are stagnant and the world economy continues to slow down. Hence, the current OECD priority should be to induce more robust and inclusive growth.

There is simply no robust evidence – old or new – of growth benefits from ‘supply-side’ tax cuts. This is the time for a pragmatic inclusive growth agenda, breaking free of the economic mythology which has held the world economy back for almost a decade.

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Global Companies Give Africa a Second Lookhttp://www.ipsnews.net/2017/09/global-companies-give-africa-second-look/?utm_source=rss&utm_medium=rss&utm_campaign=global-companies-give-africa-second-look http://www.ipsnews.net/2017/09/global-companies-give-africa-second-look/#respond Tue, 26 Sep 2017 15:27:40 +0000 Zipporah Musau http://www.ipsnews.net/?p=152247 When travelling abroad for work and looking for accommodation, Joe Eyango, a Cameroonian living in the US, considers two factors: convenient transportation from the airport and around the city and reliable Internet access. He is a university professor and wants to be able to jet in, hit the ground running, make his presentation and zoom […]

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BMW South Africa announces the production of its one-millionth BMW 3 Series sedan at its manufacturing plant in Rosslyn, Pretoria in South Africa. Credit: BMW Group

By Zipporah Musau, Africa Renewal*
UNITED NATIONS, Sep 26 2017 (IPS)

When travelling abroad for work and looking for accommodation, Joe Eyango, a Cameroonian living in the US, considers two factors: convenient transportation from the airport and around the city and reliable Internet access. He is a university professor and wants to be able to jet in, hit the ground running, make his presentation and zoom off to another destination in a day or two.

Eyango has been to various countries in Africa for business and work but has reasons for preferring South Africa. “South Africa has a lot to offer compared with other African countries. The road system is good, there is adequate electricity and reliable Internet connection, which is necessary for work and business,” Eyango told Africa Renewal in an interview.

Recently, having been invited to present a conference paper on a tight schedule, Eyango flew into Johannesburg from Amsterdam, spent less than 30 minutes in customs at the O. R. Tambo International Airport, took a taxi and was at his hotel in less than an hour since arrival.

South Africa attracts many professionals and big multinationals. It’s currently home to more than 75% of all top global companies in Africa.

“Where these big companies choose to invest depends on whether the environment is right for business. Investors are interested in relatively stable countries, good infrastructure, reliable communication, electricity and labour,” says Dr. John Mbaku, a researcher at Africa Growth Initiative at the Brookings Institution and also a professor of economics at Weber State University, US.

Some of the global companies with a presence in South Africa include luxury car manufacturers BMW, the Standard Bank Group, Barclays Bank, Vodafone (one of the world’s largest communication companies), Volkswagen, and General Electric. There is also FirstRand, Sasol, Sanlam, and MTN Group.

In an earlier interview with South African officials on why they’d chosen the country as an investment destination, Sam Ahmed, then the managing director of Britannia Industries, an India-based manufacturer of biscuits, snacks and confectionery, said his organization had been looking for a country that would give it access to the entire African market while keeping its costs low.

“In South Africa you have first-world infrastructure and third-world cost,” Ahmed said. The company’s production costs in South Africa were much lower than in Southeast Asia, the company headquarters.

Big businesses are also attracted to countries where the legal system works, so they can be assured of justice should legal issues arise. South Africa’s judiciary has been hailed for its sound judgements and independence from political machinations relative to other African countries.

Another attraction for big businesses is human resources. The efficiency and smooth operation of these large companies depend on the calibre of its labour force. Despite many years of apartheid, according to Mbaku, South Africa provides its citizens with relatively good quality education the multinationals are looking for in their labour force.

However, despite its successes, South Africa continues to grapple with a high crime rate (especially in urban areas), graft accusations and the political uncertainty that businesses loathe.

Dr. Mukhisa Kituyi, the secretary-general of the UN Conference on Trade and Development (UNCTAD), the UN body that deals with trade, investment and development issues, acknowledges that South Africa has the oldest and most developed market economy in the whole of Africa for historical reasons: the market grew out of a strong mining and industrial base and the financial industry.

However, according to Kituyi, things are now changing and other African countries are also attracting big investors. “It’s true South Africa has had a head start, but in net terms, there is faster growth in alternative centres for both manufacturing and service delivery than in South Africa. Today, the financial services industry is growing faster in Morocco than in South Africa,” Kituyi told Africa Renewal in an interview.

He notes that some multinational enterprises operating out of South Africa have relocated substantially. “We recently saw the opening of the Volvo truck-manufacturing plant in Mombasa. And similarly, we have seen many other services, particularly IT-based services and telecommunications, growing in new nodes like Nigeria, Kenya and Rwanda.”

Fringe benefits
So why should African governments want to encourage global companies to set up shop in their countries? Driven by insufficient funds, African governments are increasingly turning to private-sector companies for a much-needed boost. Foreign investments provide capital to finance industries, boost infrastructure and productivity, provide social amenities and create jobs, all of which can help a country reach its economic potential. And as countries rush to implement the Sustainable Development Goals, funding is key.

In Africa, governments and industry are gradually forming public-private partnerships (PPPs) in which companies provide capital while governments ensure an environment conducive to business. In the last 10 years, the continent has welcomed PPPs for projects in infrastructure, electricity, health and telecommunications.

Lenders like the African Development Bank are urging African countries to improve business environments by “creating the necessary legal and regulatory framework for PPPs, and to facilitate networking and sharing of experience among regulatory agencies and other similar organizations.”

Tread carefully
However, even as PPPs begin to change the face of Africa, there is need for countries to tread carefully and to learn from failed PPPs when signing up for such partnerships. “Ask yourselves, does the state have the capacity to forge ahead with these partnerships? This is necessary to avoid bad debt,” says Kituyi, adding that governments should not let private companies drive the agenda.

This word of caution is echoed by the Brookings Institution’s Mbaku, who is advising African governments to ensure that PPPs work to their advantage: “If you have a weak or corrupt leadership, you may not have the power or the skills required to negotiate a favourable partnership. You will end up with a PPP that is not really a partnership.”

Mbaku gives the example of oil companies that have been operating in Africa for more than 20 years yet still depend on expatriate labour instead of employing locals. Such companies are reluctant to transfer skills, knowledge and technology to the locals.

Another problem with PPPs is the imbalance of power. “If you are a government engaged in a PPP on a development project, there is inequality in power. The multinational has capital, skilled manpower and [an] external market. The government has no power over these,” says Mbaku.

Despite the challenges, however, PPPs will continue playing a major role in the development of poor countries. For African countries to attract multinationals and other big investors to partner with, their governments need to put their house in order—improve infrastructure, communication, security and the legal system, and fight corruption.

*(Africa Renewal, published by the UN’s Department of Public Information)

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Even in School, More Than Half of All Children Aren’t Learning, Says UNESCOhttp://www.ipsnews.net/2017/09/even-school-half-children-arent-learning-says-unesco/?utm_source=rss&utm_medium=rss&utm_campaign=even-school-half-children-arent-learning-says-unesco http://www.ipsnews.net/2017/09/even-school-half-children-arent-learning-says-unesco/#respond Mon, 25 Sep 2017 14:57:44 +0000 Roshni Majumdar http://www.ipsnews.net/?p=152232 Six out of ten children in the world are not achieving basic proficiency in reading and mathematics, a new report by the United Nations Educational, Scientific and Cultural Organization (UNESCO) shows. The numbers, which estimate 617 million children in the world, includes 387 million who are primary school age and 230 million adolescents of secondary […]

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Students at Motshane Primary School, Mbabane. Credit: Mantoe Phakathi/IPS

By Roshni Majumdar
UNITED NATIONS, Sep 25 2017 (IPS)

Six out of ten children in the world are not achieving basic proficiency in reading and mathematics, a new report by the United Nations Educational, Scientific and Cultural Organization (UNESCO) shows.

The numbers, which estimate 617 million children in the world, includes 387 million who are primary school age and 230 million adolescents of secondary school age. These numbers mean that more than one half, or 56 percent, of all children will not be able to read or perform simple math by the time they reach adolescence. Similarly, adolescents readying to enter the workforce are lacking necessary education and skills.

This snowballing effect has serious implications for the future of achieving Sustainable Development Goal (SDG) 4, which aims to achieve equality in quality education to promote “lifelong learning opportunities for all.”

The staggering numbers, however, hide vast regional differences. For instance, one out of three children in this age group, who are unable to complete education, live in sub-Saharan Africa. If this trend continues, 202 million children stand to be affected by a lack of education. The most disadvantaged group is young girls. The report estimates that more than 70 million girls will not be able to read at the minimum level.

The numbers are worrying because many children are in school – and still not learning. Of all 387 million primary aged children, 262 million are in classrooms. Similarly, 137 million adolescents in school are unable to read and write fluently.

“The figures are staggering both in terms of the waste of human potential and for the prospects of achieving sustainable development,” said Silvia Montoya, Director of the UNESCO Institute of Statistics, in a press release.
Montoya said the new data was a “wake-up call” for far greater investment in quality education.

While the global development goals for inclusive education are clear, it has become increasingly clear that access to schools, albeit a first step, is simply not good enough to ensure literacy.

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Africa Moves Towards Third Industrial Development Decadehttp://www.ipsnews.net/2017/09/africa-moves-towards-third-industrial-development-decade/?utm_source=rss&utm_medium=rss&utm_campaign=africa-moves-towards-third-industrial-development-decade http://www.ipsnews.net/2017/09/africa-moves-towards-third-industrial-development-decade/#respond Fri, 22 Sep 2017 10:52:54 +0000 Amina Mohammed http://www.ipsnews.net/?p=152199 Amina J. Mohammed, Deputy UN Secretary-General, speaking at the High-Level Event on African Industrialization

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Technical training in Bouaké, Côte d'Ivoire. Credit: UN Photo/Abdul Fatai

By Amina J. Mohammed
UNITED NATIONS, Sep 22 2017 (IPS)

Since the turn of the century, much of Africa has achieved impressive economic growth. Sixteen African countries were among the world’s top 30 fastest growing nations. Last year, the 10 fastest growing African economies posted GDP growth rates exceeding 5 per cent.

On the flip side, continued commodity-dependence – coupled with fluctuations in commodity prices – makes African economies vulnerable and hampers their ability to create decent jobs and effectively tackle poverty.

Hence the need for African countries to take further action to advance inclusive and sustainable industrial development. This is the reason behind the proclamation by the General Assembly last year of the third Industrial Development Decade for Africa. The Decade represents a global initiative in support of African industrialization.

Through it, the international community acknowledges the important link between industrialization and development, and takes note of Africa being the least industrialized, poorest and the most vulnerable continent, in spite of its immense economic and social potential.

The Decade is not an isolated undertaking, but complements other key development initiatives, such as the African Union’s Agenda 2063, the “2030 Agenda for Sustainable Development”, and various bilateral, regional and multilateral initiatives.

There are many requirements needed to make industrialization efforts bear positive outcomes.
Reliable financing is vital, and Africa and its development partners need to mobilize and prudently deploy the necessary funds.

Countries also need to design and implement comprehensive industrial policies, promote industrial entrepreneurship, advance innovation and technology, enhance energy efficiency, and promote climate change resilience.

Fund mobilization for the Decade needs to build on the Addis Ababa Action Agenda, which recognizes the importance of industrial development as a critical source or economic growth, economic diversification, and value addition.

It also highlights several key avenues for financing development initiatives. Equally important is the need to effectively leverage markets through regional integration.

Greater regional integration has the potential to support industrialization by increasing intra-African trade and intra-African investments, through the free movement of capital.

Our goal must be to provide jobs and opportunities, particularly for Africa’s growing population of youth. Industrialization can and must also be a tool for women’s empowerment and gender equality.
For this we must invest in appropriate vocational and skills training and closing the digital divide.

No single country or institution is fully equipped to tackle the challenges of African industrial development on its own. The implementation of the third Industrial Development Decade for Africa requires concerted efforts from a wide range of stakeholders.

Apart from intra-African partnerships, Africa needs to leverage the full potential of its development partners through appropriate bilateral, regional, inter-regional, and multilateral arrangements.

South-South, North-South and triangular co-operation are all necessary. The United Nations system is a key partner, along with the public and private sectors, financial institutions, civil society organizations, academia.

The Programme for Country Partnership approach by the United Nations Industrial Development Organization should be leveraged to explore funding opportunities and to devise concrete projects.
It provides a strong platform for multi-stakeholder partnership to support inclusive and sustainable industrial development.

It will help build partnerships with various stakeholders, including Development Finance Institutions and the private sector, to mobilize resources on a larger scale to achieve greater development impact. To that end, pilot programmes have already been initiated in Ethiopia and Senegal.

As we deliberate on the practical aspects to guide the implementation of third Industrial Development Decade for Africa, I appeal to all partner institutions to use their influence and expertise to promote industrialization and inclusive sustainable development that will benefit all the nations and people of Africa.

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Out of Africa: Understanding Economic Refugeeshttp://www.ipsnews.net/2017/09/africa-understanding-economic-refugees/?utm_source=rss&utm_medium=rss&utm_campaign=africa-understanding-economic-refugees http://www.ipsnews.net/2017/09/africa-understanding-economic-refugees/#comments Tue, 19 Sep 2017 15:19:45 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=152132 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.

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Young African migrants seek opportunities abroad as the World Bank projects that “the world’s extreme poor will be increasingly concentrated in Africa”. Credit: Ilaria Vechi/IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Sep 19 2017 (IPS)

Not a single month has passed without dreadful disasters triggering desperate migrants to seek refuge in Europe. According to the International Organization for Migration (IOM), at least 2,247 people have died or are missing after trying to enter Europe via Spain, Italy or Greece in the first half of this year. Last year, 5,096 deaths were recorded.

The majority – including ‘economic migrants’, victims of ‘people smugglers’, and so on – were young Africans aged between 17 and 25. The former head of the British mission in Benghazi (Libya) claimed in April that as many as a million more were already on their way to Libya, and then Europe, from across Africa.

Why flee Africa?
Why are so many young Africans trying to leave the continent of their birth? Why are they risking their lives to flee Africa?

Part of the answer lies in the failure of earlier economic policies of liberalization and privatization, typically introduced as part of the structural adjustment programmes (SAPs) that many countries in Africa were subjected to from the 1980s and onwards. The World Bank, the African Development Bank and most Western donors supported the SAPs, despite United Nations’ warnings about their adverse social consequences.

SAP advocates promised that private investment and exports would soon follow, bringing growth and prosperity. Now, a few representatives from the Washington-based Bretton Woods institutions admit that ‘neoliberalism’ was ‘oversold’, condemning the 1980s and 1990s to become ‘lost decades’.

While SAPs were officially abandoned in the late 1990s, their replacements were little better. The Poverty Reduction Strategy Papers (PRSPs) of the World Bank and IMF promised to reduce poverty with some modified policy conditionalities and prescriptions.

Meanwhile, the G8 countries reneged on their 2005 Gleneagles pledge to provide an extra US$25 billion a year for Africa as part of a US$50 billion increase in financial assistance to “make poverty history”.

Poor Africa

Thanks to the SAPs, PRSPs and complementary policies, Africa became the only continent to see a massive increase in poverty by the end of the 20th century and during the 15 years of the Millennium Development Goals. Nearly half the continent’s population now lives in poverty.

According to the World Bank’s Poverty in Rising Africa, 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”.

The continent has also been experiencing rising economic inequality, with higher inequality than in the rest of the developing world, even overtaking Latin America. National Gini coefficients – the most common measure of inequality – average around 0.45 for the continent, rising above 0.60 in some countries, and increasing in recent years.

While the continent is experiencing a ‘youth bulge’, with more young people (aged 15-24) in its population, it has failed to generate sufficient decent jobs. South Africa, the most developed economy in Sub-Saharan Africa (SSA), has a youth unemployment rate of 54%.

The real situation could be even worse. Discouraged youth, unable to find decent jobs, drop out of the labour force, and consequently, are simply not counted.

Surviving in Africa
Most poor people simply cannot afford to remain unemployed in the absence of a decent social protection system. To survive, they have to accept whatever is available. Hence, Africa’s ‘working poor’ and underemployment ratios are much higher. In Ghana, for example, the official unemployment rate is 5.2%, while the underemployment rate is 47.0%!

Annual growth rates have often exceeded 5% in many African countries in the new century. SAP and PRSP advocates were quick to claim credit for the end of Africa’s ‘lost quarter century’, arguing that their harsh policy prescriptions were finally bearing fruit. After the commodity price collapse since 2014, the proponents have gone quiet.

With trade liberalization and consequently, greater specialization, many African countries are now even more dependent on fewer export commodities. The top five exports of SSA are all non-renewable natural resources, accounting for 60% of exports in 2013.

The linkages of extractive activities with the rest of national economies are now lower than ever. Thus, despite impressive economic growth rates, the nature of structural change in many African economies have made them more vulnerable to external shocks.

False start again?
Africa possesses about half the uncultivated arable land in the world. Sixty percent of SSA’s population work in jobs related to agriculture. However, agricultural productivity has mostly remained stagnant since 1980.

With agriculture stagnant, people moved from rural to urban areas, only to find life little improved. Thus, Africa has been experiencing rapid urbanization and slum growth. According to UN Habitat, 60% of SSA’s urban population live in slums, with poor access to basic services, let alone new technologies.

Powerful outside interests, including the BWIs and donors, have been advocating large farm production, claiming it to be the only way to boost productivity. Several governments have already leased out land to international agribusiness, often displacing settled local communities.

Meanwhile, Africa’s share of global manufacturing has fallen from about 3% in 1970 to less than 2% in 2013. Manufacturing’s share of total African GDP has decreased from 16% in 1974 to around 13% in 2013. At around a tenth, manufacturing’s share of SSA’s output in 2013 is much lower than in other developing regions. Unsurprisingly, Africa has deindustrialized over the past four decades!

One cannot help but doubt how the G20’s new ‘compact with Africa’, showcased at Hamburg, can combat poverty and climate change effects, in addition to deterring the exodus out of Africa, without fundamental policy changes.

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Africa’s “Must-Do, Can-Do” Decadehttp://www.ipsnews.net/2017/09/africas-must-can-decade/?utm_source=rss&utm_medium=rss&utm_campaign=africas-must-can-decade http://www.ipsnews.net/2017/09/africas-must-can-decade/#respond Mon, 18 Sep 2017 12:02:26 +0000 Li Yong http://www.ipsnews.net/?p=152120 Li Yong is Director General of the UN Industrial Development Organization (UNIDO)

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Li Yong is Director General of the UN Industrial Development Organization (UNIDO)

By Li Yong
VIENNA, Sep 18 2017 (IPS)

Since 2000 the continent of Africa has recorded impressive rates of economic growth. This remarkable performance has been largely driven by the prolonged commodity boom and development assistance. While the continent shows great diversity in the socio-economic trajectories of its countries, growth rates have generally masked an underlying lack of structural transformation, which is needed to achieve socially inclusive and environmentally sustainable development.

Wherever industrialization has occurred, it has been a reliable force in steering economic diversification, and has contributed to developing, strengthening and upholding the framework conditions for competitive economic growth and development.

Over several decades, some developing countries – mainly in Asia – have been able to industrialize. Despite repeated attempts, Africa has not. If we look at the shares of global manufacturing value added for 2014 we see that the Asia and Pacific region’s share was 44.6%, whereas Africa’s share was just 1.6%. Sub-Saharan Africa is still the world’s least industrialized region, with only one country, South Africa, being considered industrialized.

African countries cannot achieve sustainable development without an economic structural transformation. They seek to change the structures of their economies by substantially increasing the shares of industry – especially manufacturing – in national investments, national output, and trade. African countries realize that they must undergo this structural transformation in order to address a range of interconnected challenges.

One of these is the growth of the population. More than half of the continent’s 1.2 billion-strong population is under the age of 19, and almost one in five are between 15 and 24 years old. Each year, 12 million new workers join the labour force. The continent’s young people need the tools and skills to take their lives into their own hands. Industrialization is the key to ensuring that the continent’s fast-growing population yields a demographic dividend.

Another associated challenge is migration. Many of Africa’s most ambitious and entrepreneurially minded young people feel compelled to join migration flows to the North. No country can afford to lose this potential. Migration remains a complex issue but industrialization can address one of the root causes by creating jobs in the countries of origin.

In addition, the threat posed by climate change hangs heavily over countries where agriculture remains the primary employer. Africa needs to apply and develop green technologies and channel investments into resource efficiency and clean energy. These investments can lower the cost of bringing power to rural areas, while contributing to global efforts to mitigate climate change.

Africa must industrialize, and it must do so in a socially inclusive and environmentally sustainable manner. Previous efforts to foster sustainable economic transformation in Africa have failed, and the need for a new approach is clear. What is needed now is a broad-based and country-owned process that leverages financial and non-financial resources, promotes regional integration, and mobilizes co-operation among Africa’s development partners.

This is the motivation behind the United Nations General Assembly’s proclamation of the period 2016-2025 as the Third Industrial Development Decade for Africa (IDDA III). The United Nations Industrial Development Organization (UNIDO) is leading the new approach for the IDDA III. We are fully supporting the focus on partnerships for resource mobilization, and offer an already tried and tested example of how to implement the approach: the Programme for Country Partnership (PCP).

UNIDO’s PCP combines technical assistance with policy advice, standards and investments leveraging to support the design and implementation of industrialization strategies and instruments that can make a sizeable impact on a country’s development.

Launched in 2014, the model is being successfully implemented in two African countries – Ethiopia and Senegal – as well as in Peru. The PCP is aligned with each country’s national development agenda and is a multi-stakeholder partnership model. It is designed to build synergies with ongoing government and partner interventions, while mobilizing funds and leveraging additional investment towards sectors with high growth potential.

The PCP focuses on a select number of priority sectors or areas that are essential to the government’s industrial development agenda. Priority sectors are typically selected based on job creation potential, availability of raw materials, export potential and ability to attract investment.

The PCP approach is designed to create synergies with partner programmes/projects relevant for industrial development in order to maximize impact. One particular area of focus is strategic partnerships with financial institutions and the business sector in order to leverage additional resources for infrastructure, industry and innovation, as well as knowledge, expertise and technology.

Mainstreaming of the PCP approach to other African countries can be a significant contribution to the successful implementation of the Third Industrial Development Decade for Africa. UNIDO stands ready to support Africa on its path to inclusive and sustainable industrial development.

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South-South trade cooperation key to sustainable and inclusive model of globalizationhttp://www.ipsnews.net/2017/09/south-south-trade-cooperation-key-sustainable-inclusive-model-globalization/?utm_source=rss&utm_medium=rss&utm_campaign=south-south-trade-cooperation-key-sustainable-inclusive-model-globalization http://www.ipsnews.net/2017/09/south-south-trade-cooperation-key-sustainable-inclusive-model-globalization/#respond Tue, 12 Sep 2017 06:22:38 +0000 Hanif Hassan Al Qassim http://www.ipsnews.net/?p=152020 Dr. Hanif Hassan Al Qassim, is Chairman of the Geneva Centre for Human Rights Advancement and Global Dialogue

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South-South trade cooperation key to sustainable and inclusive model of globalization

Credit: Amantha Perera/IPS

By Dr. Hanif Hassan Ali Al Qassim
GENEVA, Sep 12 2017 (IPS)

Thanks to globalization and trade liberalization of commodities, services and goods, global trade has reached an unprecedented level. According to the United Nations Conference on Trade and Development, world trade in goods was valued at approximately USD 16 trillion. North-North trade generates the highest trade volume at approximately 6 trillion; trade flows within and between countries of the Global South amounts to 4.6 trillion. Trade between the Global South and the Global North -approximately between 2.5 and 3 trillion – add up to less than the trade flows within the Earth’s two main poles.

Dr. Hanif Hassan Ali Al Qassim

With a rapid population growth on the horizon, the potential to increase South-South trade and South-North trade is crucial to maintain economic growth and promote a sustainable and inclusive model of globalization. With more than 80% of the world population living in developing countries, South-South trade has the potential to increase in the years to come and to become a vector for economic growth and prosperity for a major world region whose potential has not been fully tapped during past decades.

The 2017 International Day for South-South Cooperation is an important opportunity to raise awareness about the importance of strengthening and enhancing economic cooperation between the world’s most populous regions. According to the US Energy Information Administration, 7 out of 10 countries with the highest proven oil reserves in the world are located in the Global South (Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates (UAE) and Libya). If we look at the world’s diamond producing countries, 4 out of 7 are in thesub-Saharan Africa region (Botswana, Angola, the Democratic Republic of Congo and Namibia). Not only does the Global South account for more than 80% of the world population, it is also blessed with abundant natural resources.

There are numerous obstacles to unleashing the full potential of South-South trade cooperation, notably in the Arab region. In 1997, 14 Arab countries took the initiative to establish the Greater Arab Free Trade Area – a pan-Arab free trade and economic union – to spur economic growth in the Middle East and North Africa. This initiative can still become a success story if Arab states agree to remove and to eliminate tariffs hindering trade liberalization from taking full effect. The Gulf Cooperation Council is a good starting point. But even within this grouping which is one of the most successful economic trade block, setbacks occur. In addition, the unprecedented rise of military conflicts in the Arab region has hindered trade and economic growth. Ideological and political differences are still dividing Arab states in different sub-camps. These obstacles are also rife in many other regions in the Global South.

Another fundamental problem impeding better South-South trade cooperation is the current structure of the trade system. Many countries in the Global South are raw material producers with a strong primary sector in which the economic backbone is built primarily on the export of raw materials and commodities. Commodity and raw material prices are subject to volatility spurring social instability, as witnessed during the 2007-2008 world food price crisis or in the recent drop in oil prices. Countries in the Global South need to take further steps to move from a monoculture economy or one based on oil rent to an industrialized economy with a growing service sector as witnessed in the developed world. In the Arab region and especially in oil exporting countries, efforts are being made to diversify the economy despite the persistence of what is currently referred to as the “Dutch disease” (the discovery of natural gas in Groningen, Netherlands, drew all economic factors of production to the gas sector which led to the dereliction of the rest of the economy). The UAE, Oman, Saudi Arabia and Kuwait in particular are developing robust economic systems by reducing over-reliance on raw materials such as oil and gas. However, many countries in the Global South have not managed to free themselves from the raw material curse.

Countries in the Global South need to take further steps to move from a monoculture economy or one based on oil rent to an industrialized economy with a growing service sector as witnessed in the developed world.
In order to unleash the potential of South-South trade cooperation and ensure the right to development of their communities, countries in the Global South need to renew their commitments to create a global trade agreement that could bring about a meaningful South-South trade partnership. Although efforts were made to promote the Agreement on the Global System of Trade Preferences among Developing Countries (GSTP) as a blueprint for increased South-South cooperation, the GSTP has not materialized owing to differences in the elimination of trade tariffs. In the latest GSTP negations round that were held in Sao Paolo (Brazil), few countries signed the Sao Paolo Round Protocol despite the fact that the GSTP consisted of – at that time – 43 countries including Algeria, Egypt, Iraq, Libya, Morocco, Sudan and Tunisia. Although the Sao Paolo Round was concluded in 2010, it has not yet become effective owing to the insignificant number of countries signing and ratifying the protocol.

In order for an economic South-South trade agreement to become a reality, countries in the Global South need to ensure that trade policies are in line with the provisions set forth in the 1986 Declaration on the Right to Development. The protection of human rights needs to be embedded in all trade agreements of relevance to the Global South. In addition, developed countries must provide for an enabling environment to boost trade and development in developing countries. Unfair trade tariffs, subsidies and economic sanctions – hindering the realization of free trade between the Global South and the Global North – need to be eliminated so as to promote an inclusive and sustainable model of globalization that would serve the interest of the world society.

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Latin America Discusses How to Finance the Sustainable Development Agendahttp://www.ipsnews.net/2017/09/latin-america-discusses-finance-sustainable-development-agenda/?utm_source=rss&utm_medium=rss&utm_campaign=latin-america-discusses-finance-sustainable-development-agenda http://www.ipsnews.net/2017/09/latin-america-discusses-finance-sustainable-development-agenda/#respond Fri, 08 Sep 2017 21:52:37 +0000 Daniel Gutman http://www.ipsnews.net/?p=151998 Is it possible for the financial sector of Latin America and the Caribbean not only to think about earning money but also to contribute to the 2030 Agenda for Sustainable Development? The answer was sought in Buenos Aires, Argentina, at a regional roundtable on sustainable finance, the United Nations Environment Finance Initiative. “How to mobilise […]

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Canadian economist Eric Usher, director of the United Nations Environment Finance Initiative (UNEP FI), explains to financial sector executives from Latin America and the Caribbean their ideas for its institutions to promote the Sustainable Development Goals, atn a meeting in Argentina´s capital. Credit: Daniel Gutman/IPS

Canadian economist Eric Usher, director of the United Nations Environment Finance Initiative (UNEP FI), explains to financial sector executives from Latin America and the Caribbean their ideas for its institutions to promote the Sustainable Development Goals, atn a meeting in Argentina´s capital. Credit: Daniel Gutman/IPS

By Daniel Gutman
BUENOS AIRES, Sep 8 2017 (IPS)

Is it possible for the financial sector of Latin America and the Caribbean not only to think about earning money but also to contribute to the 2030 Agenda for Sustainable Development? The answer was sought in Buenos Aires, Argentina, at a regional roundtable on sustainable finance, the United Nations Environment Finance Initiative.

“How to mobilise sufficient funds is obviously one of the critical aspects of the agenda for sustainable development,” said Eric Usher, a Canadian economist with experience in the renewable energies sector and current director of the initiative, known as UNEP FI.

“Of course, profit maximisation is a tool for delivering economic development and it should be. But there’s a role for governments to play, to create the right framework and the enabling environment, to make sure that the private sector makes money doing the right things,” he told IPS, during the roundtable on Sept. 5-6, which brought together dozens of representatives of banks, investment funds and international bodies.

“I don’t think there is any discrepancy or problem with making money on sustainable development. The public and private sectors need to work together so we can deliver in a way that creates the most benefits,” said Usher.

UNEP FI is a global partnership between U.N. Environment and more than 200 financial entities – 129 banks, 58 insurance companies and 26 investment funds – from some 60 countries, created in the context of the 1992 Rio de Janeiro Earth Summit. The meeting in Buenos Aires meant a return, after 25 years, to the region where the initiative first emerged.“If the risk assessment is comprehensive, it should not be purely financial and short-term. For example, when a bank carries out an analysis before investing in a renewable energy project, it should take into account the kind of energy mix the country is moving towards.” -- María Eugenia Di Paola

The Latin America and Caribbean round table will be followed by four other regional roundtables this year: North America (in New York), Europe (Geneva), Africa and the Middle East (Johannesburg) and Asia and the Pacific (Tokyo).

Financial bodies and business chambers from many countries explained in Buenos Aires the progress they have made in recent years with regard to the introduction of questions such as environmental and social risk or the calculation of carbon footprints in the assessment prior to granting loans, as well as their own energy efficiency goals or the reduction of paper consumption.

It became clear, nonetheless, that the certainties are still outweighed by the unanswered questions regarding the financial sector’s participation in the 2030 Agenda, which the U.N. member countries have been working towards since 2016, through the 17 Sustainable Development Goals (SDG).

“We are barely at the start of the journey and this is not easy,” admitted Mario Vasconcelos, director of institutional relations of the Brazilian Federation of Banks (Febraban), which represents 123 financial institutions, 29 of which, he explained, have committed to finance productive projects to contribute to reducing carbon emissions.

“There are many business opportunities in the transition towards a low-carbon economy, which has already begun,” Vasconcelos said with enthusiasm.

Forty financial institutions in the region have signed the UNEP Statement of Commitment by Financial Institutions (FI) on Sustainable Development. UNEP FI has been working mainly towards building expertise in the sector about how to identify social and environmental risks in investment projects, so that these can be considered along with the economic risks.

This is perhaps the most difficult task, as Beatriz Ocampo, manager of Sustainability of Grupo Bancolombia, the most important private bank in Colombia, acknowledged to some extent.

“If you tell bankers they have to finance projects that contribute towards the fight against climate change, they will not understand what you are talking about. That is why it is important to establish what sustainable finance means,” she said.

In this sense, the region still has a long way ahead.

In Argentina, for example, questions related to sustainable finance are not a priority for most banks, due to the fact that there is no involvement by the state, and the adoption of these criteria is completely voluntary.

This was the conclusion of a report carried out in 2016 by UNEP FI together with CAF – the Development Bank of Latin America – on the basis of a survey which found that only 39 per cent of Argentine banks have implemented social environmental management systems.

One of the most commented topics during the meeting in Buenos Aires was the speech by Javier González Fraga, president of the Banco de la Nación Argentina, the largest public financial entity in the country.

He was the first speaker in the meeting and was critical of the financial sector while he praised environmentalists, which took many by surprise.

“The financial logic of these days does not allow us to protect the environment. We must not let economists, and especially not financial experts, express their opinion about the planet we are going to leave to our grandchildren,” he said.

González Fraga is a centre-right economist with vast experience, who presided over Argentina’s Central Bank during the presidency of Carlos Menem (1989-1999) and was appointed by the current president Mauricio Macri as head of Argentina’s only national bank.

In dialogue with IPS, González Fraga, who has postgraduate degrees from Harvard and the London School of Economics, expressed a conviction that “we must go about finance a different way, especially public banks.”

“Many years of experience have shown me that the classical or neoliberal theory will in no way solve environmental problems. The government must lead the way and have institutions such as state banks head up the process of change in approach,” he said.

González Fraga also condemned the U.S. government’s decision to pull out of the Paris Agreement on climate change.

“We see on TV what happened in Texas with Hurricane Harvey and it is clear that there is no need to explain what the future might hold, because it is already happening today. Donald Trump can say many things, but the reality in the U.S. can’t be denied, and people on the streets are starting to play an increasingly important role in the environmental issue,” he said.

For María Eugenia Di Paola, coordinator of Environment for the U.N. Development Programme (UNDP) in Argentina, financial institutions in the region should not find it so difficult to add social and environmental criteria to economic factors, in risk assessment.

“If the risk assessment is comprehensive, it should not be purely financial and short-term. For example, when a bank carries out an analysis before investing in a renewable energy project, it should take into account the kind of energy mix the country is moving towards,” she told IPS.

“This way, the financial sector will acquire a perspective more attuned to the 2030 Agenda. And the climate catastrophes are already occurring, so that the concepts of medium and long term are very relative,” Di Paola said.

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Scaling up Development Financehttp://www.ipsnews.net/2017/09/scaling-development-finance/?utm_source=rss&utm_medium=rss&utm_campaign=scaling-development-finance http://www.ipsnews.net/2017/09/scaling-development-finance/#respond Tue, 05 Sep 2017 15:21:51 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=151937 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.

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The United Nations and others have revived the idea of the International Monetary Fund (IMF) issuing Special Drawing Rights (SDRs) to finance development. Credit: Sriyantha Walpola/IPS

By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR , Sep 5 2017 (IPS)

The Business and Sustainable Development Commission has estimated that achievement of Agenda 2030 for the Sustainable Development Goals will require US$2-3 trillion of additional investments annually compared to current world income of around US$115 trillion. This is a conservative estimate; annual investments of up to US$2 trillion yearly will be needed to have a chance of keeping temperature rise below 1.5°C.

The greatest challenge, especially for developing countries, is to mobilize needed investments which may not be profitable. The United Nations and others have revived the idea of the International Monetary Fund (IMF) issuing Special Drawing Rights (SDRs) to finance development.

IMF quotas
SDRs were created by the IMF in 1969 to supplement member countries’ official reserves (e.g., gold and US dollars). They were designed to meet long-term international liquidity needs, rather than as a short-term remedy for payments imbalances. The SDR is not a currency, but a potential claim on freely usable currencies (e.g., USD) of IMF members.

Currently, SDRs are allocated among members according to their IMF quotas. IMF quotas determine a member’s maximum financial commitment, voting power and upper limit to financing. Determination of quotas has been influenced by the convertibility of currencies, as it provides the Fund with ‘drawable’ resources. Moreover, the current quota formula is highly influenced by countries’ GDPs and trade.

Despite some reforms over the decades, IMF quotas are biased in favour of rich countries. Thus, arguably, SDR distribution based on IMF quotas is not neutral. Allocating more rights to provide poor countries with development finance would help redress this bias.

Concessional finance
The UN has long argued for creating new reserve assets (i.e., SDRs) to augment development finance instead of current provisions for distribution according to IMF quotas.

Creating new SDRs for development finance has its origins in Keynes’ 1944 proposal for an international clearing union (ICU). The ICU was to be empowered to issue an international currency, tentatively named ‘bancor’. The ICU would also finance several international organizations pursuing desirable objectives such as post-war relief and reconstruction, preserving peace and maintaining international order, as well as managing commodities.

From the late 1950s, Robert Triffin and others urged empowering the IMF to issue special reserve assets to supplement development finance. In 1965, the United Nations Conference on Trade and Development (UNCTAD) endorsed a plan similar to Triffin’s.

According to this plan, the IMF would issue units to all member countries against freely usable currencies deposited by members. The IMF would invest some of these currency deposits in World Bank or International Bank for Reconstruction and Development (IBRD) bonds. The IBRD would then transfer some of these to the International Development Association (IDA) for long-term low-interest loans to the poorest countries.

Objections

However, the proposal was blocked by the Group of Ten developed countries. They argued that the proposal, for permanent transfers of real resources from developed to developing countries, would contradict the original intent of costless reserve creation. Additionally, the G10 argued, direct spending of SDRs would be inflationary.

The creation of SDRs is not an end in itself, but a means to raise living standards. Thus far, the SDR facility has been used to try to ensure more orderly and higher growth in international liquidity, e.g., following the 2008-2009 global financial crisis, when a new allocation of SDR 182.7 billion was approved.

Also, by substituting for gold, which requires real resources to be mined, refined, transported and guarded, with costs of production and administration near zero, SDRs generate social savings, which can be used for internationally agreed objectives.

Jan Tinbergen argued that as the creation of new money always implies that the first recipient gets money without having produced something, this privilege should be given to the poor countries of the world, instead of the rich. But changing the SDR allocation formula requires amending the IMF Articles of Agreement, which requires approval of all powerful developed countries, which seems most unlikely in these times.

Development finance
Another recent UN proposal could help overcome resistance to issuing SDRs for development finance. The proposal involves floating bonds backed by SDRs, not directly spending SDRs. Arguably, leveraging SDRs thus would expose bond holders to illiquidity risks and distort the purpose (i.e., reserve asset) for which SDRs were first created.

Opposition to the proposal should be reduced by only leveraging ‘idle’ SDRs held by reserve-rich countries to purchase such bonds. This would be comparable to countries investing foreign currency reserves through sovereign wealth funds, where the liquidity and risk characteristics of specific assets in the fund determine whether they qualify as reserve holdings. Thus, careful design for leveraging SDRs, while maintaining their reserve function, can mitigate objections.

The proposal is also in line with current donor preference for blended finance, using aid to leverage private investment. Hence, this more modest and less ambitious proposal should face less political resistance from developed countries as it delinks the SDR distribution formula from the debate over amending IMF quotas.

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Small Entrepreneurs Emerge as Backbone of Bangladesh’s Rural Economyhttp://www.ipsnews.net/2017/09/small-entrepreneurs-emerge-backbone-bangladeshs-rural-economy/?utm_source=rss&utm_medium=rss&utm_campaign=small-entrepreneurs-emerge-backbone-bangladeshs-rural-economy http://www.ipsnews.net/2017/09/small-entrepreneurs-emerge-backbone-bangladeshs-rural-economy/#respond Mon, 04 Sep 2017 16:15:54 +0000 Shahiduzzaman http://www.ipsnews.net/?p=151915 She was born in the early 1950’s to an ultra-poor family in Kundihar, a remote village of Banaripara of Barisal division in Bangladesh. She was a beautiful baby and her father named her ‘Shahndah Rani’ which means ‘Queen of Evenings’. But in reality her life was far from that of a queen. Born into acute […]

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Shahndah Rani. Credit: Shahiduzzaman

By Shahiduzzaman
Banaripara (Barisal), Sep 4 2017 (IPS)

She was born in the early 1950’s to an ultra-poor family in Kundihar, a remote village of Banaripara of Barisal division in Bangladesh. She was a beautiful baby and her father named her ‘Shahndah Rani’ which means ‘Queen of Evenings’. But in reality her life was far from that of a queen.

Born into acute poverty, there were days when she went without any food. Rani’s parents could not afford any schooling and gave her away in marriage at age 16 to relieve some of the pressures on them. She was married off to Monoranjan Dhar, who despite being poor himself, cared for Rani.

Soon after she moved in with her husband, Rani started working to produce lime from snail shells in the traditional way, by hand. Lime is one of the ingredients used in the consumption of betel leaf. Many people in Bangladesh and other South Asian countries are dependent on betel leaf or ‘paan’ chewing, which also includes other ingredients such as areca nut and often tobacco. It is chewed for its stimulant effects. Historians claim that betel leaf chewing has been part of South Asian culture for hundreds of years.

Rani’s struggle for survival began at the time of Bangladesh’s independence in 1971. She managed to save a capital fund of just 65 dollars, which she used to buy firewood and for collecting snail shells from ponds, marshland and swampland around her village. On the very first day of her business venture, she produced one kilogram of lime, which she was able to sell in a nearby rural market for about one US dollar.

Rani quickly realized that she was on the right track and understood the market value and demand. She’s never looked back.

Her husband Monoranjan proudly says, “Rani is energetic and she can think well. She gives me the courage and confidence to face the challenges of poverty together.”

Shanda Rani and her family with IFAD team members. Credit: Shahiduzzaman


Following four decades of hard work, Shandha Rani is now an icon for rural entrepreneurs in her village and community. Her husband and three adult sons work with her. She has also created jobs for three more people.

Several other women and men are following Rani’s footsteps. Dipali Rani is one of them, who also started producing lime. The local people have renamed the village Lime Para (village).

“It is good. Traders are now directly coming to us to buy our product. It also reduces our worries about marketing the product,” said Manaranjan.

Rani is eager to expand her network and business into neighbouring districts, so she is negotiating with financial institutions for loans to invest. She has successfully set up a small workshop with an electric moulding machine, a fireplace to burn snail shells and storage space. Rani is the proud owner of a motorboat for easy transportation of her product and raw materials. Her family home is now a tin-roofed, brick-walled house with a toilet on her own land. At present she has a running capital of about 10,000 dollars, with the capacity to produce 800 kg lime per day. However, lime from snail shells can’t be produced year-round because of non-availability of the shells, particularly in dry or winter seasons.

“If initiatives are taken to cultivate snail shells, it will be a big push for lime production. It has a potential market in the country. Snail shells without flesh are the key raw material for lime production. Besides, their flesh has huge demand in fish cultivation farms as feed. Such initiatives will also create more job opportunities in rural areas,” said James P. Biswas, Deputy Executive Director of the Bangladesh Development Society (BDS).

Rani’s story is one of the success stories of BDS, an NGO based in Barisal working to support development of rural entrepreneurs with assistance from the Palli Karma-Sahayak Foundation (PKSF) and the International Fund for Agricultural Development (IFAD), a United Nations specialized agency.

Since 2000, BDS has been supporting Rani. She was able to take loans 16 times and each of these loans was repaid on time. The loan amounts vary between 200 and 6,000 dollars.

“The organization has provided loans for various purposes to dozens of families in this sub-district and there has been remarkable progress. In most cases, beneficiaries have overcome poverty while at the same time creating jobs. With such success, BDS in partnership with the IFAD and PKSF is planning to increase the loan amount and help expand areas of activities,” Biswas added.

Benoit Thierry, Country Program Manager in the Asia and the Pacific Division of IFAD, who recently visited the Kundihar village along with PKSF officials, met up with several beneficiaries including Shahndah Rani to assess the impact of IFAD support in this area. Over four decades, the Fund has been providing grants and loans to Bangladesh, with the aim of enabling poor people in vulnerable areas to adapt the pattern of their livelihoods to climate change; help small producers and entrepreneurs benefit from improved value chains and greater market access and economically and socially empower marginalized groups, especially poor rural women.

Currently, the Government of Bangladesh and IFAD are negotiating to undertake another six-year project, starting in 2018, to increase farmer incomes and livelihood resilience through demand-led productivity growth, diversification and marketing in changing climatic conditions.

The proposed 111-million-dollar programme is expected to directly benefit at least 250,000 rural households in eleven districts of the country’s southern divisions of Chittagong and Barisal.

PKSF General Manager Akond Md. Rafiqul Islam said, “For many years, access to credit, cooperation, technical support and technology transfer to the poor were limited. Since its inception in 1990, PKSF has been working exclusively for their development in collaboration with 250 NGOs. In this context IFAD’s continuous assistance makes it easier to address effectively the needs of moderate and ultra-poor people. Now you will find thousands of success and trend setting entrepreneurs like Shahndah Rani all over the country.”

Things are moving and changing fast in Bangladesh. In a very real sense, these small rural entrepreneurs are strengthening the rural economy and creating huge job opportunities, Islam added. At present, PKSF is supporting more than 10 million poor people in the country, 90 percent of them women.

Israt Jahan, the top government official of Banaripara Upazilla, lauded IFAD, PKSF and NGO initiatives.

“Their activities are supplementing the government programmes, particularly in poverty alleviation, strengthening rural economy, empowerment of women and their participation in socio-economic development and cultural activities,” Jahan said.

She added that, “The Bangladesh government has made remarkable progress on poverty alleviation. While connectivity between rural areas and cities are well established, we still need to do more and welcome any support from IFAD and PKSF for programmes undertaken to benefit rural people.”

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Towards a Resource Efficient and Pollution Free Asia-Pacifichttp://www.ipsnews.net/2017/09/towards-resource-efficient-pollution-free-asia-pacific/?utm_source=rss&utm_medium=rss&utm_campaign=towards-resource-efficient-pollution-free-asia-pacific http://www.ipsnews.net/2017/09/towards-resource-efficient-pollution-free-asia-pacific/#respond Mon, 04 Sep 2017 10:31:46 +0000 Shamshad Akhtar and Erik Solheim http://www.ipsnews.net/?p=151906 Shamshad Akhtar, is Executive Secretary of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)
Erik Solheim, is Executive Director of the United Nations Environment Programme (UNEP)

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Shamshad Akhtar, is Executive Secretary of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)
Erik Solheim, is Executive Director of the United Nations Environment Programme (UNEP)

By Shamshad Akhtar and Erik Solheim
BANGKOK, Thailand, Sep 4 2017 (IPS)

Senior government officials from across Asia and the Pacific will meet in Bangkok this week for the first-ever Asia-Pacific Ministerial Summit on the Environment. The high-level meeting is co-convened by the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) and UN Environment and is a unique opportunity for the region’s environment leaders to discuss how they can work together towards a resource efficient and pollution-free Asia-Pacific.

Shamshad Akhtar

At the core of the meeting is the question: how can we use our resources more efficiently to continue to grow our economies in a manner that does not tax our natural environment or generate pollution affecting public health and ecosystem health. There is certainly much room for improvement to make in this area.

Resources such as fossil fuels, biomass, metals and minerals are essential to build economies. However, the region’s resource efficiency has regressed in recent years. Asia is unfortunately the least resource efficient region in the world. In 2015, we used one third more materials to produce each unit of GDP than in 1990. Developing countries use five times as many resources per dollar of GDP in comparison to rest of the world and10 times more than industrialized countries in the region. This inefficiency of resource use results into wastage and pollution further affecting the natural resources and public health which are the basic elements for ensuring sustainable economic growth.

As the speed and scale of economic growth continues to accelerate across the region, pollution has become a critical area for action. While the challenge of pollution is a global one, the impacts are overwhelmingly felt in developing countries. About 95 per cent of adults and children who are impacted by pollution-related illnesses live in low and middle-income countries. Asia and the Pacific produces more chemicals and waste than any other region in the world and accounts for the bulk – 25 out of 30 – of cities with highest levels of PM 2.5, the tiny atmospheric particulate matter that can cause respiratory and cardiovascular diseases and cancer. More than 80 per cent of our rivers are heavily polluted while five of the top land-based ocean plastic sources are from countries in our region. Estimates put the cost of marine pollution to regional economies at a staggering US$1.3 billion.

Erik Solheim

If left unattended, these trends threaten to up end hard-won economic gains and hamper human development. But while these challenges appear intractable, the region has tremendous strengths and opportunities to draw from. Many countries hold solid track records of successful economic transformation. The capacity for promoting environmental sustainability as an integral pillar of sustainable development must now be developed across all countries in the region

There are some profound changes underway in Asia and the Pacific. The region is experiencing the largest rural to urban migration in history. Developing these new urban areas with resource-efficient buildings, waste water and solid waste management systems can do much to advance this agenda. Advancing the “sharing economy” might mean we have better utilization of assets such as vehicles, houses or other assets, greatly reducing material inputs and pollution. The widespread move to renewable energy should rein in fossil fuel use. And advances in recycling, materials technology, 3D printing and manufacturing could also support greater resource circularity.

Moving to green technologies and eco innovation offer economic and employment opportunities. Renewable energy provided jobs for 9.8 million people worldwide in 2016. Waste can be converted into economic opportunities, including jobs. In Cebu City– the second-largest city in the Philippines, concerted Solid Waste Management has borne fruit: waste has been reduced by 30 per cent in 2012; treatment of organic waste in neigbourhoods has led to lower transportation costs and longer use period in landfills. The poor have largely benefited from hundreds of jobs that have been created.

At the policy level, it is vital that resource efficiency and pollution prevention targets are integrated into national development agendas, and targeted legal and regulatory measures to enforce resource efficiency standards should be established. For example, the Government of China has instituted a national system of legislation, rules and regulations that led to the adoption of a compulsory national cleaner production audit system that has been in place for more than 10 years. The direct economic benefits from this system is estimated to be more than $3 billion annually.

Further, we need an urgent reform of financial instruments. Too little capital is supporting the transition to green and resource efficient economy – major portion of current investments is still in high-carbon and resource-intensive, polluting economies. Polluter pay principle and environmental externalities are not yet fully integrated into pricing mechanisms and investment models. The availability of innovative financing mechanisms and integrated evaluation methods are important for upscaling and replicating resource-efficient practices. For example, the large-scale promotion of biogas plants in Viet Nam was made possible by harnessing global climate finance funds. Several countries in the region area are already emerging as leaders in the development of comprehensive, systemic approaches that embed sustainable finance at the heart of financial market development, such as Indonesia and Sri Lanka, and we should draw from the positive lessons learned from these experiences.

Resource efficiency and pollution prevention must be recognized as an important target for action by science, technological and innovation systems. This is important for the ongoing development of technology, and for scaling up technologies. Research shows that developing countries could cut their annual energy demand by more than half, from 3.4 percent to 1.4 percent, over the next 12 years. This would leave energy consumption some 22 percent lower than it would otherwise have been – an abatement equivalent to the entire energy consumption in China today.

We need to move to a more resource efficient and pollution free growth path that supports and promotes healthy environments. The cost of inaction for managing resources efficiently and preventing pollution is too high and a threat to economies, livelihoods and health across the region.

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Quantitative Easing for Wealth Redistributionhttp://www.ipsnews.net/2017/08/quantitative-easing-for-wealth-redistribution/?utm_source=rss&utm_medium=rss&utm_campaign=quantitative-easing-for-wealth-redistribution http://www.ipsnews.net/2017/08/quantitative-easing-for-wealth-redistribution/#respond Tue, 22 Aug 2017 08:51:10 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=151760 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.

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Quantitative Easing for Wealth Redistribution - A man pushes a cartful of garbage near a busy intersection in Yangon, Myanmar. Credit: Amantha Perera/IPS

A man pushes a cartful of garbage near a busy intersection in Yangon, Myanmar. Credit: Amantha Perera/IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Aug 22 2017 (IPS)

Following the 2007-2008 global financial crisis and the Great Recession in its wake, the ‘new normal’ in monetary policy has been abnormal. At the heart of the unconventional monetary policies adopted have been ‘asset purchase’ or ‘quantitative easing’ (QE) programmes. Ostensibly needed for economic revival, QE has redistributed wealth – regressively, in favour of the rich.

As its failure to revive most economies becomes apparent, and opposition to growing inequality rises, QE may soon end, judging by recent announcements of some major central banks. Already, the US Federal Reserve and the Bank of England have been phasing out purchases of financial assets, while the European Central Bank (ECB) is publicly considering how quickly to do so from December. Meanwhile, these monetary authorities are considering raising interest rates again.

Evaluated by its own declared objectives, QE has been a failure. Forbes magazine, the self-avowed ‘capitalist tool’, has acknowledged that QE has “largely failed in reviving economic growth”. By ‘injecting’ money into the economy, QE was supposed to induce banks to lend more, thus boosting investment and growth. But in fact, overall bank lending fell after QE was introduced in the UK, with lending to small and medium sized enterprises (SMEs) – responsible for most employment – falling sharply.

Bank failure to finance productive investments was not because corporations were short of cash as they have considerable reserves. Instead, the problem is due to under-consumption or overproduction, exacerbated by protracted stagnation and worsening inequality. After all, producing more when demand is soft or shrinking only leads to excess supply or gluts.

 

QE’s regressive wealth distribution

But QE has transferred wealth and income to the rich in the guise of reviving the world economy. New money created by QE was not invested in new productive activities, but instead mainly flowed into stock markets and real estate, pushing up share and property prices, without generating jobs or prosperity. QE has enriched asset owners, increasing the wealth of the rich, while not generating real wealth.

By effectively devaluing currency, QE has diminished money’s buying power, thus reducing real incomes. However, first-time or new asset purchasers lose, having to spend more to buy more expensive assets such as shares or real property. While increased asset prices have to be paid by purchasers, the additional cost to existing asset owners is partially compensated for by higher prices received for assets sold.

Thus, the claim that QE would encourage investment as well as boost growth and employment has disguised the massive redistribution or wealth transfer to the rich. QE, especially in the US and UK, has seen real wages fall as profits rose. While output may have recovered, real wages have been generally lower.

 

In the South too

QE has had similar effects in the global South, enriching asset owners at the expense of the ‘asset-poor’, while making their economies more vulnerable. QE also caused housing, stock market and commodity price bubbles as speculators rushed to buy up such assets. Until petrol prices fell in late 2014, oil-exporting countries enjoyed cash windfalls, at the expense of oil-importing countries, sometimes with devastating consequences, even if only temporary.

QE triggered huge capital flows into the developing world. Around 40 percent of the US Fed’s first QE credit expansion and a third from QE2 went abroad, mostly to ‘emerging markets’. Much of this went into buying existing assets, rather than into productive new investments. And if their currencies strengthened, their exports were undermined.

On the other hand, QE also exacerbated competitive currency devaluations. By reducing the value of their own currencies, ‘reserve currency’ monetary authorities effectively caused other currencies to appreciate, damaging their exports and trade balances.

 

Be prepared

Unlike productive long-term investments, ‘hot money’ inflows of speculative capital worsen currency volatility. Rising interest rates in the West are likely to trigger a mass exodus of capital from emerging markets, potentially triggering currency collapses in emerging markets again, as in mid-1997.

With various recent developments conspiring to reverse the last several years of unconventional monetary policies in the North, emerging markets and other developing economies are generally poorly prepared for the forthcoming change in circumstances.

While policy options in different scenarios are already being publicly considered in the Western reserve currency economies, an ostrich-like approach of not discussing and preparing for such changes is much more widespread in other economies, with potentially catastrophic consequences.

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When Policies Speak the Same Language, Africa’s Trade and Investment Will Listenhttp://www.ipsnews.net/2017/08/policies-speak-language-africas-trade-investment-will-listen/?utm_source=rss&utm_medium=rss&utm_campaign=policies-speak-language-africas-trade-investment-will-listen http://www.ipsnews.net/2017/08/policies-speak-language-africas-trade-investment-will-listen/#comments Thu, 17 Aug 2017 11:21:24 +0000 Busani Bafana http://www.ipsnews.net/?p=151709 The rising Maputo-Catembe Bridge is a hard-to-miss addition to Mozambique’s shoreline. The 725-million-dollar bridge – billed to be the largest suspension bridge in Africa on its completion in 2018 – represents Mozambique’s new investment portfolio and a show of its policy commitment to boosting international trade. But the country can improve on its trade and […]

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Mozambique is open for business. A new suspension bridge rises on Maputo Bay. Credit: Busani Bafana/IPS

Mozambique is open for business. A new suspension bridge rises on Maputo Bay. Credit: Busani Bafana/IPS

By Busani Bafana
MAPUTO, Aug 17 2017 (IPS)

The rising Maputo-Catembe Bridge is a hard-to-miss addition to Mozambique’s shoreline.

The 725-million-dollar bridge – billed to be the largest suspension bridge in Africa on its completion in 2018 – represents Mozambique’s new investment portfolio and a show of its policy commitment to boosting international trade.“African governments have identified policy incoherence as the elephant in the room." --Wadzanai Katsande of FAO

But the country can improve on its trade and investment if it can effectively align its national trade and agricultural policies to ensure sufficient coordination between trade and agricultural policymakers, experts say.

Initiatives to improve agricultural productivity, value chain development, employment creation, and food security are often constrained by market and trade-related bottlenecks which are a result of the misalignment between agricultural and trade policies.

This was part of findings discussed at a meeting convened by the United Nations’ Food and Agriculture Organisation (FAO) in the Mozambican capital earlier this month. The high-level meeting attracted decision makers from the ministries of agriculture, finance, trade, industry and commerce, private sector representatives and donor groups.

To help address this challenge, FAO, in collaboration with Enhanced Integrated Framework (EIF) at the World Trade Organisation and the European Centre for Development Policy Management (ECDPM), has piloted a regional project to help countries coordinate policy making processing, starting with agriculture and trade.

Mozambique is one of four countries in East and Southern Africa targeted in the pilot project aimed at developing a model for best practices in policy development and harmonization in enhancing economic development.

An assessment of the agriculture and trade policy framework and policymaking processes in Mozambique has been done to understand decision making in setting objectives and priorities for the country’s agriculture and trade sector.

The assessment also sought to contribute to the development of a coherent national policy framework on agricultural trade in Mozambique, said Wadzanai Katsande, Outcome Coordinator for the Food Systems Programme of the FAO.

Though listed as one of the Least Developed Countries (LDC) in the world, Mozambique is rich in natural and mineral resources including gas. The country is a bright investment destination in Africa.

Policy alignment is the key

“On paper, policies sound well and good, but in practice the story is different. There are still coordination and consistency issues in the policy formulation and implementation processes within and between agriculture and trade and these need to be addressed,” says Samuel Zita, an International Trade and Development Consultant, who recently led on an analytical study commissioned by the FAO on “Coordination between agriculture and trade policy making in Mozambique.”

“When agriculture and trade policies speak the same language that creates some predictability to investors, any disconnect between the two can have a negative effect on foreign direct investment,” Zita told IPS.

The study which focused on the country’s Comprehensive Africa Agriculture Development Programme (CAADP) and Enhanced Integrated Framework (EIF) processes also looked at the policy documents from these processes such as the CAADP National Agricultural Investment Plan (PNISA)] and the Diagnostic Trade Integration Strategy (DTIS). It recommended that Mozambique should improve the dissemination of policies, plans and strategies to stakeholders through various media. In addition, there should be an improvement in the description and publication of agricultural production and trade data.

Agriculture – defined by the national constitution as the basis of the country’s economic development – contributes 25 percent to Mozambique’s GDP of nearly 14 billion dollars. Raw aluminium, electricity, prawns, cotton, cashew nuts, sugar, citrus, coconuts and timber are major exports.

Policy cohesion can help facilitate trade development by simplifying the regulatory and policy environment for small businesses, so countries can attract private sector investment at local and international levels, says Jonathan Werner, Country Coordinator, Executive Secretariat of the Enhanced Integrated Framework at the WTO.

“We are facing many challenges for regional trade integration in Africa,” Werner Told IPS. “Our findings have shown that aligned policy processes can help create an enabling environment for trade and development.”

Policy cementing the SDGs

African governments have committed themselves to a multitude of agreements, protocols and declarations meant to promote greater agriculture productivity and trade which are major drivers of economic growth, but something is still missing in getting it all together: effective policies both at national and regional levels. Until the well-meaning policies trade and agriculture are aligned, Africa will continue to miss out on attracting the level of investment it should.

Mozambique has taken the first steps towards aligning its national agriculture and trade sector policies to boost economic development.

“African governments have identified policy incoherence as the elephant in the room and getting the policies in trade and agriculture to speak to each other is key to turning policies into action,” Katsande said noting that agriculture and trade development form the basis of key initiatives such as the Comprehensive Africa Agriculture Development Programme (CAADP), the Malabo Declaration and African Union’s Agenda 2063.

A boost for Inter-Africa trade

Africa has no less than 14 regional trading blocs but inter-Africa trade is low at 12 percent of the continent’s trade, according to statistics from the Common Market for Eastern and Southern Africa (COMESA). However, Africa’s trade with Europe and Asia is at nearly 60 percent. Some of the bottlenecks to Africa trading with Africa include trade policy harmonization, reducing export/import duties low production capacity, differing production quality standards and poor infrastructure.

The United Nations Conference on Trade and Development (UNCTAD) estimates that the Continental Free Trade Area (CFTA) set to be signed into operation by December 2017 will help double inter African trade. In 2012 African head of state endorsed the establishment of the free trade area by 2017. Trade is one of the pathways to unlocking economic growth in Africa to boost employment and foster innovation in a continent replete with opportunities.

Gerhard Erasmus, an associate at the Trade Law Centre, a trade law capacity building institution based in Cape Town, South Africa, said low inter-Africa trade was a real issue which has been blamed by some economists on the fact that African nations often produce the same goods (mostly agriculture and basic commodities) for which the intra-African export opportunities are limited.

“Unless we move up the ladder of value addition, industrialization and services we will remain stuck,” Erasmus said. “Thus domestic development plans need adjustment and targeted investments are necessary. There are many trade facilitation challenges, from long queues at border posts, corruption, uncoordinated technical standards and requirements, to red tape and inadequate infrastructure.”

Eramus said regional economic communities and even the African Union had policies and plans to address the many trade challenges, but implementation often encountered problems at national levels regarding political buy-in, lack of resources, technical capacity problems, and plain bad governance.

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