By Frank Mulder
UTRECHT, Netherlands, Jan 4 2016 (IPS)

Venezuela doesn’t want investment treaties anymore if they give investors the right to drag the country before a commercial court. “The system has been set up to break down the nation-state.”

All is not going well for Venezuela. While the country is torn apart by poor governance, poverty and polarisation, it is attacked from the outside by oil firms claiming tens of billions of dollars.

The method these firms use is called ISDS, or Investor-State Dispute Settlement. This is a mechanism by which investors can sue a state by means of arbitration, which is a kind of privatized court. Many lawyers stress the advantage that plaintiffs don’t have to go before a local judge whom they feel they cannot trust. You can choose a judge for yourself, the opponent does the same, and the two of those choose a chairman. They are called arbitrators. The case is heard at a renowned institute, like the World Bank. How could it be more fair?

Biased

But Bernard Mommer, former vice-minister for oil in the time of Hugo Chavez, now the main witness in different claims against Venezuela, has to laugh a bit. “I won’t say that Caracas is a neutral venue. But don’t be so foolish to say that Washington is neutral. The whole arbitration system is biased in favour of investors.”

After Argentina, no country has been sued as much as Venezuela: until 2014 at least 37 cases have been filed against this Latin American state. However, the fine they can expect now exceeds all of the others. ConocoPhillips, a Texas-based oil company, claims 31 billion dollars and seems to be on the winning side. According to critics, that case represents everything that’s wrong with the ISDS system.

Oil dispute

The dispute about oil began in 2006. Under the activist leadership of Chavez, Venezuela decided to nationalise the oil sector. Also, higher taxes were announced. Mommer was responsible for the negotiations with international oil firms about compensation. Most of the 41 companies in the country agreed with the buyout. Two didn’t. Those were the Texas-based companies ConocoPhillips and Mobil (now ExxonMobil).

“When we started with the expropriation, they went for arbitration,” says Mommer. “I didn’t even know that this was possible. For arbitration two parties need to consent, don’t they? How could they sue a state?” But Mommer discovered that Venezuela signed Bilateral Investment Treaties (BITs) in 1991, among others with the Netherlands. Those treaties give all investors from the given country an offer to arbitration if they feel treated unfairly by the host state.

Dutch sandwich

ConocoPhillips and Mobil quickly moved their Venezuelan holdings to the Netherlands in 2006. That gave them the opportunity to claim, as Dutch investors, that the unexpected policy change violated their BIT rights. Together, they demanded 42 billion dollars.

“This is called the Dutch sandwich”, says George Kahale III, a top lawyer from New York, who defends Venezuela in different cases. “You put a Dutch holding in the middle of your company chain and you can call yourself Dutch.”

Companies are not allowed to do this if the dispute already started. ExxonMobil and Conoco said that their move was made independently of the dispute. However, a remarkable message has been found among the Wikileaks cables. In these a representative of Conoco told someone from the American embassy that they “already” moved to the Netherlands to “safeguard their arbitration rights.”

Unlawful

The cases are still dragging on. ExxonMobil has had no luck. The three arbitrators have judged that the expropriation was lawful. ExxonMobil gets compensation, but not much more than what they were offered earlier, around one billion dollars.

But the Conoco case evolved differently. Two of the three arbitrators found the expropriation unlawful. This means that Venezuela has to compensate the firm, not on the basis of the low oil price in 2006, but on the basis of the much higher price at the time of the claim. This will amount to tens of billions of dollars.

This is insane, says Kahale. “The fact is that four out of six arbitrators found that the expropriation was perfectly lawful. And yet Venezuela can expect a mega award.”

Unfair

Talking about fairness: among the Wikileaks cables another juicy anecdote has been found. In a cable from 2008, the Conoco representative tells the American ambassador that the negotiations are going well and that Venezuela is being reasonable. This is in contradiction to what Conoco was claiming in public. Yet the arbitrators – at least, two of the three – now say that they can’t change their conclusion anymore and now have to proceed to the next phase, about the damages.

“In other words”, says Mommer, “the investor can lie. We can’t sue them anyway. They alone can sue us. This shows why Western countries have invented this system. It has been set up to break down the nation-state.”

Disaster

ISDS is structurally flawed, says Kahale. “Who are the judges? They are investment lawyers. Their commercial background shines through in their decisions. Every judge of course always brings his own views to his job. But in arbitration these people are deciding no longer private commercial disputes, but megacases of international significance, with sometimes vital importance for individual states, involving billions of dollars, with very little training in international law.”

Too many, conflicts of interest arise. “You will never see a supreme court judge acting as a counsel in another case. But many arbitrators also act as a counsel. It’s very hard to preside over the legality of something one day, and advocate the same issue the other day. It is natural that I’m holding back in one or the other, depending on which case is more important to me. There are very few checks and balances. Too many mistakes are made.”

Venezuela is fed up with ISDS claims. Soon after the claims were filed, they pulled the plug, not only from the ICSID convention (which acknowledges the World Bank as arbitration court) but also from a number of BITs. The Dutch BIT was the first to be terminated a few years ago. Unfortunately for Venezuela, this treaty contains a clause giving investors the right to arbitration until 2023.

Don’t challenge us

Arbitration can be an elegant method for solving a dispute. But is has developed into an instrument for multinational companies to pressure states.

“These oil firms were offered a brilliant compensation,” says Juan Carlos Boue, a Venezuelan researcher at the Oxford Institute of Energy. “But when the oil price rose, they decided to leave the country with as much money as possible.” For ExxonMobil, a giant with a revenue of 400 billion dollars, twice as big as the GDP of Venezuela, there is more at stake. “They have unlimited resources. They want to let the world know what happens if you challenge them.”

And the arbitrators? “Some of them are on the boards of multinational companies. They just don’t want the countries to get away with it. They have an extreme dislike towards countries like Venezuela.”

ExxonMobil and ConocoPhillips refrained from any comment.

(End)

Excerpt:

By Hazel Henderson
ST. AUGUSTINE, Florida, Aug 27 2015 (IPS)

Millions in the New York City area are excited about Pope Francis’ visit on Sep. 25 to address the U.N. General Assembly as worldwide consensus grows on the need to shift global investments from fossil fuels to clean, efficient, renewable energy in the UN’s Sustainable Development Goals (SDGs) scheduled to replace the expiring Millennium Development Goals (MDGs). 

Private investments worldwide in the clean energy transition now total 6.22 trillion dollars while successful U.S. students’ divestment networks have forced over 30 college endowments to divest.  Over 200 institutions have divested worldwide, including the U.S. cities of Minneapolis and Seattle, Oxford in the United Kingdom and Dunedin in New Zealand.

Hazel Henderson

The Episcopal Church and the Church of England, in a faith-based consortium, are calling on Pope Francis to urge divestment for all religious and civic groups.  Islamic Climate Change Symposium leaders cited the Quran earlier this month in calling 1.6 billion Muslims to act in phasing out fossil fuels by 2050.

Backlash from traditional Wall Streeters has joined some U.S. Catholic organisations with millions still invested in fossil energy, fracking and oil sands.  The U.S. Conference of Catholic Bishops (USCCB) has guidelines against investing in abortion, contraception, pornography, tobacco and war but is silent on energy stocks.

Reuters reports that Catholic dioceses in Boston, Baltimore, Toledo and much of Minnesota in the United States have millions of dollars in oil and gas stocks, making up between 5-10 percent of their holdings.  It has been reported that Chicago’s Archbishop Blasé Cupich, appointed by Pope Francis, will re-examine over 100 million dollars in fossil fuel investments.

Wall Street is also re-examining its positions on fossil fuels.  A survey of asset managers in Institutional Investor, July 2015, found that 77 percent expected the carbon-divestiture movement to continue and gain momentum.  Yet, Exxon Mobil CEO Rex Tillerson has claimed that the models on climate change “aren’t that good” and has no plans to invest in renewable energy.

Recently, many large companies have been calling for and budgeting for carbon pricing – favoured by most economists.  Britain’s BG Group, BP, Italy’s ENI, Shell, Norway’s Statoil and France’s Total sent an open letter to world governments and the United Nations in June asking them to accelerate carbon pricing schemes.The U.S. Conference of Catholic Bishops (USCCB) has guidelines against investing in abortion, contraception, pornography, tobacco and war but is silent on energy stocks

The ethical investing movement now accounts for one-sixth of all holdings on Wall Street and the U.N. Principles of Responsible Investing counts signatory institutions with 59 trillion dollars in assets under management.

Hybrid approaches include venture philanthropy and “impact” investing, while a recent CFA Institute survey found almost three quarters of investment professionals use environmental, social and governance information in their investment decisions.

Against this backdrop, Timothy Smith, pioneer founder of the Interfaith Council on Corporate Responsibility (ICCR) and now Senior Vice-President of Walden Asset Management, says that the “visit of the Pope in the wake of his prophetic Encyclical on climate is a clarion call – to ramp up our efforts to combat climate change with concrete actions,” adding that “it’s not the Pope’s job to present a specific game plan for Americans.  That is our job.”

Through ICCR, religious investors have worked for two decades on these issues.  Firms like Walden, Ceres and others have joined up to combat climate change, promoting efficiency and renewable resources.  All this new activity within the climate debate provides the greatest challenge yet to business-as-usual capitalism.

Many financiers in the global casino still see themselves as “masters of the universe” because they control capital flows, most investments, pension funds, influence monetary policies, capture politicians and regulators, while funding friendly academics and think tanks.

The recent jitters of stock markets have again revealed their fragility and the increasing turbulence and volatility caused by computerized algorithms accounting for over half of all activity.  High-frequency trading (HFT), “flash crashes”, are continuing with little regulation.  Foundations are crumbling from these many new challenges as small investors flee. 

Crowdfunding, peer-to-peer lending, local and cryptocurrencies, credit unions and cooperative enterprises are flowering along with hybrid start-ups in the “shareconomy” – AirBnB, Uber, Lyft, Task Rabbit and the growth of farmers markets, swap sites for tools, clothes and second-hand exchanges.

Many reformers of capitalism try to change its culture, of short term gain and speculative trading.  The U.N. Inquiry into the Design of a Sustainable Financial System will release its report to the General Assembly on Sep. 25, with global research on current practices and potential reforms.

A promising new effort to mobilise U.S. public opinion is JUSTCapital, founded by luminaries Deepak Chopra, Arianna Huffington and hedge fund philanthropist Paul Tudor Jones.  CEO Martin Whittaker says: “We are addressing some of the core questions affecting capitalism and corporations in the 21^st century.  We are applying policy, research and surveys to define ‘just business behaviour’ in the eye of the public, using this definition to evaluate and rank the performance of the largest publicly traded American companies.”

While such caring financiers are quietly exploring reforms, the biggest threat is the fragility of global market structures from automation, algorithms, HFT and artificial intelligence which financiers still believe they can control.

Yet these same computers can now run markets more efficiently than humans.  Matching and trading buy and sell orders in transparent computerised black boxes makes human traders redundant, as well as reducing insider trading, speculating, front-running, naked short-selling, fixing interest rates and today’s widespread greed and corruption.

Capitalism’s greatest challenge is its reliance on rollercoaster national money systems and currencies.  Central bankers and governments’ tools fail along with economic theories as social movements are now aware of money-printing and the politics of money creation and credit-allocation, revealed in all its favouritism and inequalities.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Aug 22 2015 (IPS)

As the political situation in Brazil appears to be reaching a state of unstable equilibrium, or more bluntly, as it is transformed from instability to impasse, the economy continues to deteriorate.

The sharpening of political conflicts that could lead to an outright collapse of the economy seems to have been attenuated by the shift on Apr. 7 of effective political power from President Dilma Rousseff to Vice-President Michel Temer.

Fernando Cardim de Carvalho

Temer was successful in bringing Renan Calheiros, the chairman of the Federal Senate, back to the government camp, in a power-sharing agreement meant to isolate the chairman of the House, Eduardo Cunha, who has assumed a much more radical stance. The arrangement has worked so far.

The pressure on the President to resign or on the appropriate bodies to give cause to initiate impeachment processes seems to have reached its limit. Popular opposition to the federal administration, which has its stronghold in Sao Paulo – as shown in mass demonstrations in March and April and most recently on Aug. 16 – has not seen the snowball growth its leaders expected.

In sum, positions seem to have been hardened as a measure of political accommodation has been reached, with the Brazilian Democratic Movement Party (PMDB) taking the lead on the side of government, and the formal opposition to government, including the nominally leading opposition party, the Brazilian Social Democracy Party (PSDB), rallying to the side of Eduardo Cunha, still their best hope on the way to an impeachment procedure.

Street demonstrations at this point seem to be unable to change this picture. Still, it should be noted that only the opposition has been able to organise large demonstrations. Attempts by pro-government groups to do the same in favour of the government have been few and largely unsuccessful.

In this context, as expected, the Brazilian economy continues to deteriorate. The contractionary impact of fiscal retrenchment has been greater than anticipated because not many people can foresee what will come next. In fact, no one can, even if announced measures will in fact be implemented while current difficulties, including fiscal difficulties, grow further.

The federal government was not able to pass the contractionary measures it argued to be essential, thus creating a ‘Catch 22’ situation in which one expects the success of the government to be very bad for the country but its failure to be even worse. Many economists are predicting a fall in 2015 GDP close to two percent, postponing chances of recovery until at least 2017.

“[Brazil] finds itself at an impasse. No political force seems to be strong enough, or even interested in finding a better and more promising alternative policy strategy”
If this contraction actually happens, it will be one the most serious recessions in recent history, much worse than what happened in 2008 and 2009.

The reasons for this are complex and the government is partly correct to point to the worsening of the external scenario. China can no longer carry Brazil forward. The recovery of the U.S. economy is weak and volatile. Europe is unable to overcome its own fossilised views on the virtues of austerity, causing the whole area to limp around.

Of course, this excuse only goes so far. Many analysts had called the attention of government authorities to the fact that growth during President Lula da Silva’s two terms in office (2003-2011) would vanish in the event that China lost its breath, as has actually happened.

The country lost the opportunity to make the investments, particularly in infrastructure, which could have increased its productive capacity. Efficient industrial policies should have been consistently implemented to that end, public investment should have been expanded, and consistent exchange rate policies should have been sought to change the picture of overvaluation that has been killing local manufacturing, on and off, since the Real Plan was implemented in 1994.

Practically nothing of this was effectively done. Investment plans were announced that had no consequence, local manufacturers became importers on an increasing scale, and roads, ports and energy production fell behind needs, while the government presented policies to increase household indebtedness to expand consumption as a successful combination of economic and social policies.

In the last two years of Rousseff’s first term (2011-2014), these policies were not even successful in increasing growth rates and GDP stalled as the government appealed more and more to tricks, particularly accounting tricks, and the distribution of favours to politically-connected sectors to try to revive the economy.

To a large extent, the turn to austerity was motivated by the failure to revive the economy, which doubled the bet on mistaken policies. Austerity measures in a shrinking economy can only accelerate the fall. But the dissolution of the political power of the president tripled the bet.

No one can believe that the president has the power to effectively pursue an alternative policy path. In fact, if the alternative to austerity is going back to what she did in her first term, the president will not find any supporters, except, perhaps, in her fast-shrinking number of hard-core believers.

So the country finds itself at an impasse. No political force seems to be strong enough, or even interested in finding a better and more promising alternative policy strategy. The more radical opponents – the Workers’ Party (PT) and the PSDB – got lost in a ‘blame game’, trying to pin down which of two presidents, Fernando Henrique Cardoso or Lula, had been worse.

None of them seems to have anything to offer. PMDB does not deal in wholesale strategies, it is more interested in retailing. Given the steep loss of trust in the PT or its leaders, including Lula, the party seems to be excluded from any power arrangement to be designed in the near future (its perspectives for the long-term future are at a minimum very uncertain).

The situation of the PSDB is not much better, because all it has in its favour is the receding memory of the Cardoso period, in which much the same problems were as serious as they are now and the party was as incompetent in pointing to solutions as the PT is now.

In this situation, the PMDB stepped in. It reached some measure of political stability but it has no vision of where to take the economy. Given its structure as a federation of state leaderships, the PMDB deals better with favours than with strategies.

As happened under President José Sarney in the late 1980s, this may be enough – in the best of circumstances – to put the brakes on economic deterioration but not to guide its revival.

The country will survive, of course, as it has done in the past.  The problem is that Brazil has experience of unfortunately all too frequent low-quality political leadership, so even the optimistic analysts can only see hardship ahead. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Federico Lavopa
BUENOS AIRES, Aug 12 2015 (IPS)

The investor-state dispute settlement (ISDS) system has come under increasing criticism in recent years.

Inconsistent decisions, poorly reasoned awards, lack of transparency, parallel proceedings, serious doubts about arbitrator’s impartiality and the sheer size of the compensations sought by investors and awarded by arbitration tribunals are just some examples of the flaws that have been pointed out by detractors of the system.

Federico Lavopa

The dozens of cases that were initiated against Argentina as a result of the outburst of one of its worst economic and financial crises in late 2001 became an often-quoted sad illustration of many of these shortcomings of the ISDS system.

Apart from the tragic consequences entailed by the economic and political crisis which was faced by Argentina, in particular in 2001/2002, which included a fall in gross domestic product (GDP) per capita of 50 percent, an unemployment rate of over 20 percent, a poverty rate of 50 percent, strikes, demonstrations, violent clashes with the police, dozens of civil casualties and a succession of five presidents in 10 days, Argentina received a flood of claims from foreign investors that were filed under different ISDS mechanisms and, in particular, before the International Centre for Settlement of Investment Disputes (ICSID).

Indeed, in the period 2003-2007, claims against Argentina represented one-quarter of all the cases initiated within the framework of the ICSID Convention. These claims before international arbitral tribunals challenged the changes to the economic rules that Argentina had implemented to contain the effects of perhaps the worst economic cycle of its history.

After 1991, Argentina had embarked on an economic deregulation and liberalisation programme. Among others, this programme included the convertibility of the Argentine peso and the creation of a currency board to maintain parity between the peso and the U.S. dollar by limiting the local money supply to the amount of Argentina’s foreign exchange reserves. “If all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars”

This economic and pro-market programme was accompanied by a strong emphasis on the attraction of foreign investment which, among other aspects, resulted in the conclusion of 58 bilateral investment treaties (BITs) – 55 of which came into effect.

It also included a mass privatisation process of public companies which, at that time, represented an important part of the domestic economy.

This market-oriented model reached its limits in the late 1990s, and in May 2003 a new president took office, whose government reformed the regulatory framework for the economy – particularly that for the public services privatised over the 1990s – and introduced a package of emergency laws which implied a considerable change in the conditions under which foreign investors and, in particular, public services providers had to run their business in Argentina.

As a consequence, many of them decided to resort to the investor-state dispute settlement mechanisms embodied in the dozens of bilateral investment treaties that Argentina had signed in the 1990s. In total, in the period 2001-2012, exactly 50 cases were filed against Argentina.

A striking characteristic of the Argentinian experience is the amount of requests for compensations made by the companies that sued Argentina. According to estimates made when the peak of cases following the crisis was reached, if all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars.

This sum would have been practically impossible to pay, even if Argentina had not been undergoing a period of acute economic crisis, because it represented approximately 13 percent of Argentina’s GDP for 2013.

Although Argentina’s response to this flood of cases was varied and it is still early to offer definite figures, it is already possible to conclude that, in general, arbitration tribunals were prone to render awards in favour of investors.

Almost 45 percent of the cases have received a condemnatory award, although most of these cases could still be reversed by annulment proceedings, whereas only 15 percent of the arbitration proceedings ended up with a final decision completely in favour of Argentina. The remaining 30 percent are mostly cases which resulted in an agreement between the parties or which were altogether suspended.

All in all, of the 80 billion dollars of the possible amount of compensations calculated when the peak of cases against Argentina was reached following the crisis, Argentina has so far received final rulings involving the payment of 900 million dollars.

The first salient conclusion is that the ISDS system has a very low capacity to adapt to totally exceptional circumstances for which it does not seem to have been designed. Despite the efforts of Argentinian attorneys to show that the measures implemented in the post-crisis period were adopted in an emergency context, being so exceptional as to justify any breach of the substantial clauses of the BITs, few tribunals were prepared to sustain this defence.

This notwithstanding, and with most of these cases having already been dealt with, the upcoming scenario for Argentina seems much less drastic than that forecast when the peak of cases was reached.

While they represent a heavy burden for a developing country like Argentina, so far the compensations actually paid amount to a small portion of the sum initially estimated.

The Argentinian case also represents a worrisome example of the failure of the ISDS system to ensure coherence and soundness in its decisions.

Although the dozens of cases submitted against Argentina addressed exactly the same package of measures (the post-crisis emergency laws) and  had to assess very similar arguments of the different claimants and a practically identical series of defences put forward by the Argentinian government, the conclusions at which they arrived have shown striking differences.

Additionally, some of the decisions have been subject to strong criticism and/or declared null and void by annulment committees.

Finally, the experience of Argentina shows the difficulties that arbitration tribunals might encounter when trying to scrutinise the economic policy choices made by governments. On top of the sensitiveness of examining sovereign decisions of States, arbitrators might find themselves in the awkward situation of deciding on highly technical matters which they are clearly ill-equipped to assess.

The case of Argentina thus represents a sad example of the urgent need to reconsider and reform the ISDS system. Yet, the lessons to be drawn from this experience do not seem to lead to clear conclusions about which direction to take.

On the one hand, the system has proved to be extremely inflexible, which prevented it from addressing the exceptional peculiarities of the Argentinian case. On the other hand, however, the wide margin of discretion available for the arbitral tribunals resulted in the adoption of inherently poor decisions, and with high levels of incoherence among them. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  This column is based on a paper with the same title published as South Centre Investment Policy Brief No 2, July 2015, available here.

Excerpt:

By Daya Thussu
LONDON, Jul 22 2015 (IPS)

The formal opening of the BRICS Bank in Shanghai on Jul. 21 following the seventh summit of the world’s five leading emerging economies held recently in the Russian city of Ufa, demonstrates the speed with which an alternative global financial architecture is emerging.

The idea of a development-oriented international bank was first floated by India at the 2012 BRICS summit in New Delhi but it is China’s financial muscle which has turned this idea into a reality.

Daya Thussu

The New Development Bank (NDB), as it is formally called, is to use its 50 billion dollar initial capital to fund infrastructure and developmental projects within the five BRICS nations – Brazil, Russia, India, China and South Africa – though it is also likely to support developmental projects in other countries.

According to the 43-page Ufa Declaration, “the NDB shall serve as a powerful instrument for financing infrastructure investment and sustainable development projects in the BRICS and other developing countries and emerging market economies and for enhancing economic cooperation between our countries.”

The NDB is led by Kundapur Vaman Kamath, formerly of Infosys, India’s IT giant, and of ICICI Bank, India’s largest private sector bank. A respected banker, Kamath reportedly said during the launch that “our objective is not to challenge the existing system as it is but to improve and complement the system in our own way.”

The launch of the NDB marks the first tangible institution developed by the BRICS group – set up in 2006 as a major non-Western bloc – whose leaders have been meeting annually since 2009. BRICS countries together constitute 44 percent of the world population, contributing 40 percent to global GDP and 18 percent to world trade.“Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way” – Kundapur Vaman Kamath, head of the New Development Bank (NDB)

In keeping with the summit’s theme of ‘BRICS partnership: A powerful factor for global development’, the setting up of a developmental bank was an important outcome, hailed as a “milestone blueprint for cooperation” by a commentator in The China Daily.

The Chinese imprint on the NDB is unmistakable. The Ufa Declaration is clear about the close connection between the NDB and the newly-created Asian Infrastructure Investment Bank (AIIB), also largely funded by China. It welcomed the proposal for the New Development Bank to “cooperate closely with existing and new financing mechanisms including the Asian Infrastructure Investment Bank.” China is also keen to set up a regional centre of the NDB in South Africa.

If economic cooperation remained the central plank of the Ufa summit, there is also a clear geopolitical agenda.

The Global Times, China’s more nationalistic international voice, pointed out that the establishment of the NDB and the AIIB will “break the monopoly position of the International Money Fund (IMF) and the World Bank (WB) and motivate [them] to function more normatively, democratically, and efficiently, in order to promote reform of the international financial system as well as democratisation of international relations.”

The reality of global finance is such that any alternative financial institution has to function in a system that continues to be shaped by the West and its formidable domination of global financial markets, information networks and intellectual leadership.

However, China, with its nearly four trillion dollars in foreign currency reserves, is well-placed to attempt this, in conjunction with the other BRICS countries. China today is the largest exporting nation in the world, and is constantly looking for new avenues for expanding and consolidating its trade relations across the globe.

China is also central to the establishment of the Shanghai Cooperation Organisation (SCO), a Eurasian political, economic and security grouping whose annual meeting coincided with the seventh BRICS summit. Founded in 2001 and comprising China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, the SCO has agreed to admit India and Pakistan as full members.

Though the BRICS summit and the SCO meeting went largely unnoticed by the international media – preoccupied as they were with the Iranian nuclear negotiations and the ongoing Greek economic crisis – the economic and geopolitical implications of the two meetings are likely to continue for some time to come.

For host Russia, which also convened the first BRICS summit in 2009, the Ufa meeting was held against the background of Western sanctions, continuing conflict in Ukraine and expulsion from the G8. Partly as a reaction to this, camaraderie between Moscow and Beijing is noticeable – having signed a 30-year oil and gas deal worth 400 billion dollars in 2014.

Beijing and Moscow see economic convergence in trade and financial activities, for example, between China’s Silk Road Economic Belt initiative for Central Asia and Russia’s recent endeavours to strengthen the Eurasian Economic Union. The expansion of the SCO should be seen against this backdrop. Moscow has also proposed setting up SCO TV to broadcast economic and financial information and commentary on activities in some of the world’s fastest growing economies.

Whatever the outcome, it is clear that a new international developmental agenda is being created, backed by powerful nations, and to the virtual exclusion of the West.

China is the driving force behind this. Despite its one-party system which limits political pluralism and thwarts debate, China has been able to transform itself from a largely agricultural self-sufficient society to the world’s largest consumer market, without any major social or economic upheavals.

China’s success story has many admirers, especially in other developing countries, prompting talk of replacing the ‘Washington consensus’ with what has been described as the ‘Beijing consensus’. The BRICS bank, it would seem, is a small step in that direction.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

“Just as the world is moving towards multi-polarity, so is Asia … The economic fragmentation of the region and the competitive pursuit of security interests may well consign the Asian Century into a brief interlude rather than a millennial transformation”. Photo credit: Public domain via Wikimedia Commons

By Shyam Saran
NEW DELHI, Jun 1 2015 (IPS)

It has been apparent for some time that we are in the midst of a historic shift of the centre of gravity of the global economy from the trans-Atlantic to what is now becoming known as the Indo-Pacific.  

This is an emerging centre of economic dynamism and comprises what was earlier confined to the Asia-Pacific but now includes the South Asian region as well.

This is a region which now accounts for nearly 40 percent of world gross domestic product (GDP), which is likely to rise to 50 percent or more by 2050.  Its share of world trade is now 30 percent and growing.

Shyam Saran

This year, the region has become the largest source of foreign direct investment (FDI), surpassing the European Union (EU) and the United States. China has been the main driver of this historic shift, but other Asian economies have also made significant contributions.

As the Chinese economy begins to slow, India shows promise of regaining an accelerated growth trajectory under a new and decisive political leadership. This will help extend the scale and direction of this shift. Its geopolitical consequences will be profound.

It must be recognised that the economic transformation of Asia, in particular the spectacular growth of China, has been enabled by an unusually extended and liberal global economic environment, underpinned by the faith in globalisation and open markets.

It has also been enabled by a U.S.-led security architecture in the region which kept in check, though did not resolve, the long-standing political fault lines and regional conflicts over competing territorial claims and unresolved disputes.

This relatively benign and supportive economic and security environment is in danger of unravelling precisely at a time when the situation in the region is becoming more complex and challenging.  Paradoxically, this is partly a consequence of the very success of the region in achieving relative economic prosperity.“The danger is that instead of an inclusive and regionally integrated Asia, we may end up with exclusive and competing clusters, moving at different speeds, with different norms and standards. This may well undermine the very basis of Asia’s economic dynamism”

We are witnessing new trends in the region which, unless managed with prudence and foresight, may well sour the prospects of an Asian Century.

The relatively open and liberal trade and investment regime, in particular access to the large consuming markets of the United States, European Union and Japan, is now under serious threat.

Protectionist trends are already visible in these advanced economies as they struggle with prolonged economic stagnation which is the fall-out of the global financial and economic crisis of 2007-2008.

Instead of the consolidation and expansion of the open and inclusive economic architecture that had hitherto been the hallmark of the regional and global economy, we are witnessing its steady fragmentation.

In the Indo-Pacific region, there are competing regional trade arrangements and investment regimes, with no clarity on the contours of a new and emerging economic architecture.

The United States is spearheading its Trans-Pacific Partnership (TPP) which will include some Asian economies, but not India and China.

China has countered by proposing a free trade area encompassing the current Asia-Pacific Economic Cooperation (APEC) membership.  This will include China and the United States but not India and some of the Association of Southeast Asian Nations (ASEAN) economies.

The Regional Cooperation Economic Partnership (RCEP) would include all ASEAN countries plus China, Japan, Republic of Korea, India, Australia and New Zealand, but not the United States.

And finally, there is the East Asia Summit process (EAS) which includes all the above-mentioned countries but also the United States and Russia.

The danger is that instead of an inclusive and regionally integrated Asia, we may end up with exclusive and competing clusters, moving at different speeds, with different norms and standards.  This may well undermine the very basis of Asia’s economic dynamism.

In the security field, too, we are witnessing a growing salience of inter-state tensions and competitive military build-up.

The U.S.-led security architecture remains in place formally but its erstwhile predominance is diminished.

The gap between the military capabilities of China and the United State is closing steadily. As China’s security footprint expands beyond its shores, it will inevitably intersect with the existing deployment of the forces of the United States and its allies and partners.

Faced with an increasingly uncertain security environment and threatened by a more insistent assertion of territorial claims by China, the countries of the region, including Japan, Republic of Korea, members of ASEAN, Australia and India are building up their own defences, in particular maritime capabilities, and this itself is escalating tensions.

There is as yet no emerging regional security architecture which could help manage inter-state tensions in the region. This includes the growing possibilities of confrontation between the United States and China.

In the absence of such a regional security architecture, based on a broad political consensus and a mutually acceptable Code of Conduct, the region may well witness a heightening of tension and even conflict.  These developments would inevitably and adversely impact on the dense network of trade and investment relations that bind the countries of the region together and erode the very basis of their prosperity.

In this context, mention may be made of the Chinese One Belt One Road (OBOR) initiative which seeks to deploy China’s surplus capital to build a vast network of transport and infrastructural links not only across the Indo-Pacific but also straddling the Eurasian landmass.

The newly established Asian Infrastructure Investment Bank (AIIB) initiated and led by China would become a key financing instrument for the OBOR.  China has also recently come out with a new Defence White Paper, which puts forward a new strategy of Open Seas, shifting the emphasis from coastal and near sea defence to an expanding naval presence which matches China’s growing global profile and world-wide location of Chinese-controlled economic assets.

While China’s investment in regional infrastructure in Asia may be welcome, it will inevitably be accompanied by a security dimension which may heighten anxieties among countries in the Asian region and beyond.

It is apparent from the above analysis that it is no longer possible for any major power in the Indo-Pacific to unilaterally seek a position of overweening economic dominance or military pre-eminence of the kind that the United States enjoyed over much of the post-Second World War period.

Just as the world is moving towards multi-polarity, so is Asia.  It is now home to a cluster of major powers with significant economic and security capabilities and interests. The only practical means of avoiding a unilateral and potentially destructive pursuit of economic and security interests would be to put in place an inclusive economic architecture underpinned  by a similarly inclusive security architecture which provides mutual reassurance and shared opportunities for promoting prosperity.

The economic fragmentation of the region and the competitive pursuit of security interests may well consign the Asian Century into a brief interlude rather than a millennial transformation. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, Apr 20 2015 (IPS)

This month’s World Economic Outlook released by the International Monetary Fund (IMF) only confirms that consequences of the collapse of the financial system, which started six years ago, are serious. And they are accentuated by the aging of the population, not only in Europe but also in Asia, the slowing of productivity and weak private investment.

Roberto Savio

Average growth before the financial crisis in 2008 was around 2.4 percent. It fell to 1.3 percent between 2008 and 2014 and now the estimates are that it will stabilise at 1.6 percent until 2020, in what economists call the “new normal”. In other words, “normality” is now unemployment, anaemic growth and, obviously, a difficult political climate.

For the emerging countries, the overall picture does not look much better. It is expected that potential growth is expected to decline further, from an average of about 6.5 percent between 2008 and 2014 to 5.2 percent during the period 2015-2020.

The case of China is the best example. Growth is expected to fall from an average 8.3 percent in the last 10 years to somewhere around 6.8 percent. The result is that the Chinese contraction has worsened the balance of exports of raw materials everywhere.

The crisis is especially strong in Latin America, and in Brazil the fall in exports has contributed to worsening the country’s serious crisis and increasing the unpopularity of President Dilma Rousseff, already high because of economic mismanagement and the Petrobras scandal.“Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis”

This, by the way, opens up a reflection which is fundamental. From Marx to Keynes, redistribution theories were all basically built on stable or expanding economies.

Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis. What it tends to do is mimic the receipts and proposals from the Right and, when the crisis is over, it has lost its identity and has declined in the eyes of the electorate.

From this perspective, the situation in Europe is exemplary. All those right-wing xenophobic parties which have sprouted up – even in countries long held to be models of democracy such as the Nordic countries – have developed since 2008, the beginning of the financial crisis. In the same period of time, all progressive parties have lost weight and credibility. And now that the IMF sees some improvement in the European economy, it is not the traditional progressive parties that are the beneficiaries.

The term that the IMF gives to the current economic moment is “new mediocrity” – which is a franker way of saying “new normal” – and it observes that in the coming five years, we will face serious problems for public policies like fiscal sustainability and job creation.

In fact, every day, the macroeconomic figures, which have become the best way to hide social realities, are becoming less and less realistic if we go back to microeconomics as we have done during the last 50 years.

The best example is the United Kingdom, which is the champion of liberalism. Each year it has cut public spending and now claims to have growth in employment, with 600,000 new jobs in the last year. The only problem is that if you look into the structure of those jobs, you will find that the large majority are part-time or underpaid, and employment in the public sector is at its lowest since 1999.

A clear indicator is the number of people who visit the food banks created to meet the needs of the indigent. In the world’s sixth largest economy, their numbers have grown from 20,000 before the crisis seven years ago to over one million last year. And the same has happened all over Europe, albeit to a lesser extent in the Nordic countries.

U.K. economists have published studies on how austerity has affected growth. According to the Office for Budgetary Responsibility, established by the U.K. government, austerity blocked economic growth by one percent between 2011 and 2012. But, according to Simon Wren-Lewis of Oxford University, the figure is actually about five percent (or 100 billion pounds).

In other words, fiscal austerity reduces growth, and this creates large deficits which call for more fiscal austerity. It is a trap that Nobel laureate Keynesian economists Joseph Stiglitz and Paul Krugman have described in detail to no avail. We are all following the “liberal order” of Germany, which think its reality should be the norm and that deviations should be punished.

Now, while we can all agree that much of this is obvious to the average citizen in terms of its impact on everyday life, what is important and new is that the IMF, the fiscal guardian which has imposed the Washington Consensus (basically a formula of austerity plus free market at any cost) all over the Third World with tragic results, has woken up to reality.

Don’t get me wrong – I’m not implying that the IMF is becoming a progressive organisation, but there are signs that an important pillar of neoliberal thinking is vacillating.

Of course, those responsible for the global crisis – bankers – have come out with impunity. The world has exacted over three trillion dollars from its citizens to put banks back on their feet. The over 140 billion dollars in fines that banks have paid since the beginning of the crisis is the quantitative measure of illegal and criminal activities.

The United Nations calculates that the financial crisis has created at least 200 million new poor, several hundred millions of unemployed, and many more precarious jobs, especially for young people. And, yet, nobody has paid, while prisons are full of people who are there for minor theft, the social impact of which is infinitesimal by comparison.

In 2014, James Morgan, the boss of Morgan Stanley, cashed in 22.5 million dollars, Lloyd Blanfein, the boss of Goldman Sachs, 24 million, James Dimon, the boss of J.P. Morgan, 20 million. The most exploited of all, Brian Moynihan of the Bank of America, a paltry 13 million. Nobody stops the growth of bankers.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Apr 1 2015 (IPS)

Even moderately well-informed analysts knew that the Brazilian economy was in dire straits as President Dilma Rousseff initiated her second term in office in January.

Unlike her predecessor, Luiz Inácio Lula da Silva (2003-2011), Rousseff had not the same luck with the situation of the international economy. But also, unlike Lula, Rousseff showed herself a poor saleswoman for Brazilian goods and an even poorer manager of domestic economic policy.

Fernando Cardim de Carvalho

There was a strong suspicion that economic policy, especially in the last two years of her first term, had been conducted in ad hoc ways and that serious adjustments would be needed to steer the economy back to working condition anyway. Still, the situation seemed to be even worse than most analysts feared.

More surprising, however, is to find out that Brazilian politics is also in dire straits. Caught off guard by the Petrobras corruption scandal, federal authorities, beginning with Rousseff herself, seemed to become paralysed by the rapid fall in public support, completely losing the power of initiative and creating a dangerous political vacuum in the country.

It is a vacuum rather than a political threat because the opposition seems to be as lost as the president. The political right, never very fond of democratic institutions any way, seemed to be more interested in making the president “bleed” – as stated by Senator (and former vice-presidential candidate) Aloysio Nunes Ferreira, of the Brazilian Social Democracy Party – than with fighting for political hegemony.

Economic problems were certainly fostered by the quality of economic policy-making in the second half of Rousseff’s first term. The realisation that tailwinds created by the Chinese demand for raw materials were no longer blowing led the government to implement a series of measures to stimulate the economy that turned out to be largely useless.

It was not “heterodoxy” that characterised the policy, it was uninformed wishful thinking. A plethora of measures were taken in isolation, without any apparent unifying strategy behind them, distributed mostly as “gifts” from the federal government (which later contributed to the public perception that corruption became a system of government). “Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts”

Plagued by semi-structural exchange rate problems, whereby Brazilian producers lose competitiveness in the face of imported goods in domestic markets and of other sellers in international markets, the federal administration tried to deal with them piecemeal, mostly through instruments like tax reductions or changes in tax rates.

Obsessed with car production, the government burned resources trying to stimulate production (only to meet increasing resistance of other countries to import them, most notably Argentina), again without any strategy thinking about how these newly-produced automobiles would be used in polluted and traffic-jammed Brazilian cities.

The federal government was not deficient only in terms of strategic thinking but also in terms of home caretaking: all available evidence points to the high probability that tax reductions and other similar measures were decided without any calculation of costs, lost fiscal revenues, and so on.

Anti-cyclical macroeconomic policy in late 2008 relied to a large extent on the expansion of consumption expenditures fuelled by increasing household indebtedness. The increase in non-performing loans and income stagnation made this option more and more unsustainable. Investment, in contrast, public and private, repeatedly frustrated expectations.

Unable to finance badly needed infrastructure investments, the government showed itself to be extraordinarily slow in devising appropriate strategies to attract private investors to implement them. Apparently lost in their own inability to define a way out of the mess, the government “muddled through” situations where more forceful definitions were required, as was the case of electric power.

The list of failures or of situations where the government showed inability to lead is long and well known. What was surprising to some extent was to find out that all evidence suggests that the government itself was unaware of what was going on.

Winning re-election by a narrow margin, President Rousseff, characteristically after a long period of hesitation, decided to take a 180-degree turn, asking a known orthodox and fiscal conservative economist to head an empowered Ministry of Finance, surprising even her supporters who seemed to be perplexed by the need to defend policies that they hotly denounced when presented by opposition politicians.

This picture would be difficult enough to manage without the Petrobras scandal. But Petrobras is not only the largest company in the country, it is practically a symbol of the nationality. Besides, energy was supposed to be Rousseff’s area of expertise and she was in fact responsible for the company’s policies for a while, as Minister of Mines and Power.

An increasingly loud murmur of a possible impeachment of the president led her to equivocal political decisions, beginning with the definition of her cabinet, widely considered to be particularly low quality, and alienating not only her major party in government, the Brazilian Democratic Movement Party, but even the majority of her own Workers’ Party.

The result of such initiatives was illustrated by the twin public demonstrations of Mar. 13 and 15.

On Mar. 13, nominal supporters of Rousseff marched through the streets of most of the largest cities in the country. Speaking to the press, most of the leaders of the march (Lula did not participate) declared conditional support for Rousseff – that is, conditional on the firing of the Minister of Finance and change of newly announced austerity policies.

On Mar. 15, an even larger crowd marched in the same cities declaring unconditional opposition to the president.

Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts. The president is slow and generally equivocal when making fateful decisions. The right-wing opposition seemed to be more interested in enjoying the possibility of enacting a “third” ballot to obtain at least a moral condemnation of the president.

This would be bad enough for a country that has just celebrated thirty years of civilian government. When the economy adds its own heavy problems to the political vacuum, it is impossible not to fear the future. (END/IPS COLUMNIST  SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Driven by solar and wind, world investments in renewable energy leapt in 2014. Photo credit: Jürgen from Sandesneben, Germany/Licensed under CC BY 2.0

By Sean Buchanan
ROME, Mar 31 2015 (IPS)

Driven by solar and wind, world investments in renewable energy reversed a two-year dip last year, brushing aside the challenge from sharply lower oil prices and registering a 17 percent leap over the previous year to stand at 270 billion dollars.

These investments helped see an additional 103Gw of generating capacity – roughly that of all U.S. nuclear plants combined –around the world, making 2014 the best year ever for newly-installed capacity, according to the 9th annual “Global Trends in Renewable Energy Investments” report from the U.N. Environment Programme (UNEP) released Mar. 31.

Prepared by the Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance, the report says that a continuing sharp decline in technology costs – particularly in solar but also in wind – means that every dollar invested in renewable energy bought significantly more generating capacity in 2014."Climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent" – Achim Steiner, Executive Director of UNEP

In what was called “a year of eye-catching steps forward for renewable energy”, the report notes that wind, solar, biomass and waste-to-power, geothermal, small hydro and marine power contributed an estimated 9.1 percent of world electricity generation in 2014, up from 8.5 percent in 2013.

This, says the report, means that the world’s electricity systems emitted 1.3 gigatonnes of CO2 – roughly twice the emissions of the world’s airline industry – less than it would have if that 9.1 percent had been produced by the same fossil-dominated mix generating the other 90.9 percent of world power.

“Once again in 2014, renewables made up nearly half of the net power capacity added worldwide,” said Achim Steiner, Executive Director of UNEP. “These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent.”

China saw by far the biggest renewable energy investments last year – a record 83.3 billion dollars, up 39 percent from 2013. The United States was second at 38.3 billion dollars, up seven percent on the year (although below its all-time high reached in 2011). Third came Japan at 35.7 billion dollars, 10 percent higher than in 2013 and its biggest total ever.

According to the report, a prominent feature of 2014 was the rapid expansion of renewables into new markets in developing countries, where investments jumped 36 percent to 131.3 billion dollars. China with 83.3 billion, Brazil (7.6 billion), India (7.4 billion) and South Africa (5.5 billion) were all in the top 10 investing countries, while more than one billion dollars was invested in Indonesia, Chile, Mexico, Kenya and Turkey.

Although 2014 was said to be a turnaround year for renewables after two years of shrinkage, multiple challenges remain in the form of policy uncertainty, structural issues in the electricity system and even the very nature of wind and solar generation which are dependent on breeze and sunlight.

Another challenge, says the report, is the impact of the more than 50 percent collapse in oil prices in the second half of last year.  However, according to Udo Steffens, President of the Frankfurt School of Finance and Management, the price of oil is only likely to dampen investor confidence in parts of the sector, such as solar in oil-exporting countries and biofuels in most parts of the world.

“Oil and renewables do not directly compete for power investment dollars,” said Steffens. “Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh. Their long-term story is just more convincing.”

Of greater concern is the erosion of investor confidence caused by increasing uncertainty surrounding government support policies for renewables.

“Europe was the first mover in clean energy, but it is still in a process of restructuring those early support mechanisms,” according to Michael Liebreich, Chairman of the Advisory Board for Bloomberg New Energy Finance. “In the United Kingdom and Germany we are seeing a move away from feed-in tariffs and green certificates, towards reverse auctions and subsidy caps, aimed at capping the cost of the transition to consumers.

“Southern Europe is still almost a no-go area for investors because of retroactive policy changes, most recently those affecting solar farms in Italy. In the United States there is uncertainty over the future of the Production Tax Credit for wind, but costs are now so low that the sector is more insulated than in the past. Meanwhile the rooftop solar sector is becoming unstoppable.”

A media release announcing publication of the UNEP report said that if the positive investment trends of 2014 are to continue, “it is increasingly clear that major electricity market reforms will be needed of the sort that Germany is now attempting with its Energiewende [energy transition].”

The structural challenges to be overcome are not simple,” it added, “but are of the sort that have only arisen because of the very success of renewables and their over two trillion dollars of investment mobilised since 2004.”

Edited by Phil Harris    

By Joaquín Roy
MADRID, Mar 31 2015 (IPS)

The visit to Cuba of Federica Mogherini, High Representative of the European Union for Foreign Affairs and Security Policy on Mar. 23-24, and the forthcoming visit in May planned by French President François Hollande, have fast-tracked the agenda of relations between the European Union and Cuba.

The sudden announcement of normalisation of diplomatic ties between the United States and Cuba in December last year set the context for the rapprochement between Brussels and Havana.

Joaquín Roy

At the time, negotiations were already under way on a bilateral ‘Political Dialogue and Cooperation Agreement’; after years of confrontation, the European Union was prepared to abandon the “common position” imposed by Brussels on the Fidel Castro regime in 1996.

While Washington’s stance was that the persistence of a strictly Marxist regime deserved the imposition of conditions for ending its embargo, the European Union and a consensus of its governments held to the policy of so-called “constructive engagement”. EU member states continued to relate to Cuba on an individual basis according to their special historical links, economic interests and a range of views on human rights.

After a number of tensions were overcome, in 2014 Brussels decided to adopt a pragmatic programme that would lead to a cooperation agreement similar to those signed between the European Union and every other country and bloc in Latin America and the Caribbean.

For many years E.U. relations with Cuba were mainly represented by initiatives led by Spain, which veered from spearheading the imposition of demands on Havana, especially at critical times during right-wing People’s Party (PP) governments, to pursuing an incentives strategy under the left-wing Spanish Socialist Workers’ Party (PSOE).“While Washington’s stance was that the persistence of a strictly Marxist regime deserved the imposition of conditions for ending its embargo, the European Union and a consensus of its governments held to the policy of so-called ‘constructive engagement’ [with Cuba]”

The process even came to be sarcastically called a “Hispanic-Spanish issue”.  In this context, a number of European states behaved according to their own convenience, with no essential change in the overall scenario.

Cuba avoided dealing with the broader European community, opting instead a for country-by-country approach. But the world was changing, and the real value of Europe’s stock in Cuba fell.

Then it was the right time for Brussels to seize the day and take advantage of the circumstances to negotiate with Cuba, with an open agenda that would include dismantling the “common position”.

After discrete exchanges, both sides decided to sit down for talks. Surprisingly, Cuba was open to a process without which the common position would be eliminated, as had been its strong traditional demand.

Spain itself was facing a delicate internal situation and needed to seek stability on other fronts. Consolidation of its relations with Latin America depended on juggling the claims and expectations of different domestic ideological groupings. Moreover, the vote of the Latin American bloc was vitally important for Spain’s candidature to the U.N. Security Council, a consideration that counselled extreme caution on the part of Madrid.

In the new era, it is hard to predict what role Spain will play in the Cuban transition, but in principle it has remarkable potential, and not just because of the weight of history and the contemporary importance of the “special relationship” between the two countries.

It is relevant to note that U.S. influence on Cuba’s own national identity has not been limited to imposing its hegemonic power. A hefty dose of the “American way of life” has become an essential part of the Cuban being.

The “enemy” was never the United States per se, but its concrete policies of harassment. The ease with which Cuban exiles of different epochs and different social backgrounds fit into U.S. society shows the naturalness of this curious relationship. Normalisation of relations will help reinforce the link.

European interests would do well to take note because the rebirth of the natural relationship between the United States and Cuba will provide strong competition to the relative advantage that European interests have so far achieved, and could significantly reduce it.

The outcome of competition from U.S. economic and political power in Cuba vis-á-vis renewed European operations will depend to a large extent on the nature and intensity of Washington’s renewed involvement with the island. Europe could maintain its relative advantage if the Cuban authorities themselves, or the surviving embargo restrictions, however moderated, set limits to U.S. activity.

It is worth emphasising that European activities in Cuba will continue to be limited, within E.U. institutional structures as well as on the pragmatic agendas of its member countries, as long as the U.S. embargo lasts. Restrictions on trade and investments continue to affect full freedom of movement by European companies in Cuba itself, as well as their transnational alliances in the rest of the world where U.S. interests are dominant.

As a result, even in a relatively open relationship, the real possibilities for a European advantage remain largely speculative, and may even decline, especially in the area of trade and investments.

The key factor in this uncertainty is a legacy of more than half a century of the absence of relations, which have not been ”normal” during this period yet which aspire to become so in the future. (END/IPS COLUMNIST SERVICE)

Translated by Valerie Dee – Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* Joaquin Roy can be contacted at jroy@miami.edu

Excerpt:

By Frederic Mousseau
OAKLAND, United States, Jan 27 2015 (IPS)

At the same time as the United States, Canada and the European Union announced a set of new sanctions against Russia in mid-December last year, Ukraine received 350 million dollars in U.S. military aid, coming on top of a one billion dollar aid package approved by the U.S. Congress in March 2014. 

Western governments’ further involvement in the Ukraine conflict signals their confidence in the cabinet appointed by the new government earlier in December 2014. This new government is unique given that three of its most important ministries were granted to foreign-born individuals who received Ukrainian citizenship just hours before their appointment.

Frédéric Mousseau

The Ministry of Finance went to Natalie Jaresko, a U.S.-born and educated businesswoman who has been working in Ukraine since the mid-1990s, overseeing a private equity fund established by the U.S. government to invest in the country. Jaresko is also the CEO of Horizon Capital, an investment firm that administers various Western investments in the country.

As unusual as it may seem, this appointment is consistent with what looks more like a takeover of the Ukrainian economy by Western interests. In two reports – The Corporate Takeover of Ukrainian Agriculture and Walking on the West Side: The World Bank and the IMF in the Ukraine Conflict – the Oakland Institute has documented this takeover, particularly in the agricultural sector.

A major factor in the crisis that led to deadly protests and eventually to president Viktor Yanukovych’s removal from office in February 2014 was his rejection of a European Union (EU) Association agreement aimed at expanding trade and integrating Ukraine with the
EU – an agreement that was tied to a 17 billion dollar loan from the International Monetary Fund (IMF).

After the president’s departure and the installation of a pro-Western government, the IMF initiated a reform programme that was a condition of its loan with the goal of increasing private investment in the country.“The manoeuvring for control over the country’s [Ukraine’s] agricultural system is a pivotal factor in the struggle that has been taking place over the last year in the greatest East-West confrontation since the Cold War”

The package of measures includes reforming the public provision of water and energy, and, more important, attempts to address what the World Bank identified as the “structural roots” of the current economic crisis in Ukraine, notably the high cost of doing business in the country.

The Ukrainian agricultural sector has been a prime target for foreign private investment and is logically seen by the IMF and World Bank as a priority sector for reform. Both institutions praise the new government’s readiness to follow their advice.

For example, the foreign-driven agricultural reform roadmap provided to Ukraine includes facilitating the acquisition of agricultural land, cutting food and plant regulations and controls, and reducing corporate taxes and custom duties.

The stakes around Ukraine’s vast agricultural sector – the world’s third largest exporter of corn and fifth largest exporter of wheat – could not be higher. Ukraine is known for its ample fields of rich black soil, and the country boasts more than 32 million hectares of fertile, arable land – the equivalent of one-third of the entire arable land in the European Union.

The manoeuvring for control over the country’s agricultural system is a pivotal factor in the struggle that has been taking place over the last year in the greatest East-West confrontation since the Cold War.

The presence of foreign corporations in Ukrainian agriculture is growing quickly, with more than 1.6 million hectares signed over to foreign companies for agricultural purposes in recent years. While Monsanto, Cargill, and DuPont have been in Ukraine for quite some time, their investments in the country have grown significantly over the past few years.

Cargill is involved in the sale of pesticides, seeds and fertilisers and has recently expanded its agricultural investments to include grain storage, animal nutrition and a stake in UkrLandFarming, the largest agribusiness in the country.

Similarly, Monsanto has been in Ukraine for years but has doubled the size of its team over the last three years. In March 2014, just weeks after Yanukovych was deposed, the company invested 140 million dollars in building a new seed plant in Ukraine.

DuPont has also expanded its investments and announced in June 2013 that it too would be investing in a new seed plant in the country.

Western corporations have not just taken control of certain profitable agribusinesses and agricultural activities, they have now initiated a vertical integration of the agricultural sector and extended their grip on infrastructure and shipping.

For instance, Cargill now owns at least four grain elevators and two sunflower seed processing plants used for the production of sunflower oil. In December 2013, the company bought a “25% +1 share” in a grain terminal at the Black Sea port of Novorossiysk with a capacity of 3.5 million tons of grain per year. 

All aspects of Ukraine’s agricultural supply chain – from the production of seeds and other agricultural inputs to the actual shipment of commodities out of the country – are thus increasingly controlled by Western firms.

European institutions and the U.S. government have actively promoted this expansion. It started with the push for a change of government at a time when president Yanukovych was seen as pro-Russian interests. This was further pushed, starting in February 2014, through the promotion of a “pro-business” reform agenda, as described by the U.S. Secretary of Commerce Penny Pritzker when she met with Prime Minister Arsenly Yatsenyuk in October 2014.

The European Union and the United States are working hand in hand in the takeover of Ukrainian agriculture. Although Ukraine does not allow the production of genetically modified (GM) crops, the Association Agreement between Ukraine and the European Union, which ignited the conflict that ousted Yanukovych, includes a clause (Article 404) that commits both parties to cooperate to “extend the use of biotechnologies” within the country.

This clause is surprising given that most European consumers reject GM crops. However, it creates an opening to bring GM products into Europe, an opportunity sought after by large agro-seed companies such as Monsanto.

Opening up Ukraine to the cultivation of GM crops would go against the will of European citizens, and it is unclear how the change would benefit Ukrainians.

It is similarly unclear how Ukrainians will benefit from this wave of foreign investment in their agriculture, and what impact these investments will have on the seven million local farmers.

Once they eventually look away from the conflict in the Eastern “pro-Russian” part of the country, Ukrainians may wonder what remains of their country’s ability to control its food supply and manage the economy to their own benefit.

As for U.S. and European citizens, will they eventually awaken from the headlines and grand rhetoric about Russian aggression and human rights abuses and question their governments’ involvement in the Ukraine conflict? (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

The inclusive and sustainable industrial development (ISID) initiative of the U.N. Industrial Development Organisation to promote industrial development for poverty reduction, inclusive globalisation and environmental sustainability is gaining momentum in the countries of the African, Caribbean and Pacific (ACP) group. 

A concrete sign of this trend came on the occasion of last week’s ACP Council of Ministers meeting in the Belgian capital where UNIDO Director-General Li Yong met with ACP representatives to explore how to further promote inclusive and sustainable industrialisation in their countries and possible ways of scaling up investment in developing countries.

UNIDO Director-General Li Yong at the !00th ACP Council of Ministers meeting in Brussels, where he explored how to further promote inclusive and sustainable industrialisation in ACP countries. Credit: Courtesy of ACP

During the opening session of the ministers’ meeting, outgoing ACP Secretary-General Alhaji Muhammad Mumuni had already highlighted the key role of the ISID programme in promoting investment and stimulating competitive industries in African, Caribbean and Pacific countries.

In December last year in Lima, Peru, the 172 countries belonging to UNIDO – including ACP countries – unanimously approved the Lima Declaration calling for “inclusive and sustainable industrial development”.

The Lima Declaration clearly acknowledged that industrialisation is an important landmark on the global agenda and, for the first time, the spectacular industrial successes of several countries in the last 40 years, particularly in Asia, was globally recognised.

According to UNIDO statistics, industrialised countries add 70% of value to their products and recent research by the organisation shows how industrial development is intrinsically correlated with improvements in sectors such as poverty reduction, health, education and food security.“We need to move away from traditional models of industrialisation, which have had serious effects on the environment and the health of people” – UNIDO Director-General Li Yong

One major issue that the concept of ISID addresses is the environmental sustainability of industrial development. “We need to move away from traditional models of industrialisation, which have had serious effects on the environment and the health of people,” said Li.

Economic growth objectives should be pursued while protecting the environment and health, and by making business more environmentally sustainable, they become more profitable and societies more resilient.

ISID in the Post-2015 Agenda

“For ISID to be achieved,” said Li, “appropriate policies are essential as well as partnerships among all stakeholders involved.” This highlights the importance of including ISID in major development frameworks, particularly in the post-2015 development agenda that will guide international development in the coming decades.

With strong and solid support from the ACP countries, ISID has already been recognised as one of the 17 Sustainable Development Goals (SDGs) proposed by the U.N. Open Working Group on SDGs – to take the place of the Millennium Development Goals (MDGs) whose deadline is December 2015 – and confirmed last week by U.N. Secretary-General Ban Ki-moon in ‘The Road to Dignity By 2030’, his synthesis report on the post-2015 agenda.

In fact, goal 9 is specifically devoted to “building resilient infrastructure, promoting inclusive and sustainable industrialisation and fostering innovation.”

In this context, Mumuni told the Brussels meeting of ACP ministers that “in building the competitiveness of our industries and facilitating the access of ACP brands to regional and international markets, UNIDO is regarded by ACP Secretariat as a strategic ally.”

ACP-UNIDO – A Strategic Partnership

A Memorandum of Understanding approved in March 2011 and a Relationship Agreement signed in November 2011 represent the solid strategic framework underlying the strategic partnership between ACP and UNIDO, and highlight how the two partners can work together to support the implementation of ISID in ACP countries.

Key is the establishment and reinforcement of the capacity of the public and private sectors in ACP countries and regions for the development of inclusive, competitive, transparent and environmentally-friendly industries in line with national and regional development strategies.

On the basis of these agreements, ACP and UNIDO have intensified their policy dialogue and concrete cooperation. One example reported during the ministers’ meeting was the development of a pilot programme entitled “Investment Monitoring Platform” (IMP), funded under the intra-ACP envelope of the 9th European Development Fund (EDF) with the support of other donors.

This programme is aimed at managing the impact of foreign direct investments (FDI) on development, combining investment promotion with private sector development, designing and reforming policies that attract quality investment, and enhancing coordination between the public and private sector, among others.

This programme has already reinforced the capacity of investment promotion agencies and statistical offices in more than 20 African countries, which have been trained on methodologies to assess the private sector at country level.

Implementing ISID in ACP Countries

In Africa, the strategy for the Accelerated Industrial Development of Africa (AIDA) prepared with UNIDO expertise, is a key priority of Agenda 2063  – a “global strategy to optimise use of Africa’s resources for the benefit of all Africans” – and of the Joint Africa-European Union Strategy.

In the Caribbean, high priority is being given to private sector development, climate change, renewable energy and energy efficiency, and value addition in agri-business value chains, trade and tourism.

The CARIFORUM-EU Business Forum in London in 2013 clearly articulated the need for more innovation, reliable markets and private sector information, access to markets through quality and the improvement of agro-processing and creative industries.

In the Pacific, the 2nd Pacific-EU Business Forum held in Vanuatu in June this year called for stronger engagement in supporting the private sector and ensuring that innovation would produce tangible socio-economic benefits.

Finally, in all three ACP regions, interventions related to quality and value chain development are being backed in view of supporting the private sector and commodity strategies.

(Edited by Phil Harris)

By Manuel F. Montes
GENEVA, Nov 12 2014 (IPS)

As the international community wades into the political discussions regarding the alternatives to the Millennium Development Goals (MDGs) after 2015 and the design of the Sustainable Development Goals (SDGs) as mandated by the Rio+20 conference, it is timely to consider the question of whether development is a matter mostly of individual effort on the part of nation-states or whether there are elements in the international economic system that could serve as significant obstacles to national development efforts.

If there are obstacles in the international economic system, it is important that the post-2015 development agenda and the SDGs address the question of the elimination or the reduction of these obstacles.

Manuel F. Montes

The limited number of successfully developing countries since the 1950s has provoked a debate over whether the success of these countries required their success in eluding international obstacles to development.

The question is to evaluate features of the international system on the basis of how these features are conducive to enabling long-term investment toward economic diversification.

Terminologies of previous development orthodoxies litter the development literature – import substitution, industrialisation, basic needs, structural adjustment, Washington Consensus and Millennium Development Goals (MDGs).

Each of these orthodoxies tended to be a reaction to perceived weaknesses or missing elements from the immediately previous one. The most recent orthodoxy, as exemplified by the MDGs, is that development is about poverty eradication.

But poverty eradication is an overly narrow, possibly misleading, perspective on development.“Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment”

Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment.

The association of development with poverty reduction created for the donor community the pride of place in economic policy in developing countries.

But this place can be at the cost of reducing the responsibility of donor countries in helping to maintain an enabling international environment for development in trade, finance, human resource development and technology.

In the MDGs, these issues are crammed into “MDG-8”, the so-called global partnership for development, with a very selective and poorly defined set of targets.

Development requires not just higher levels of income, nutrition, education, and health outcomes but in the first place involves higher levels of productivity and capabilities.

Higher levels of productivity and capabilities are possible only with structural transformation of the economy.

In turn, in most societies, according to a report by the Secretary-General of the U.N. Conference on Trade and Development (UNCTAD), such a structural transformation has been “associated with a shift of the population from rural to urban areas and a constant reallocation of labour within the urban economy to higher-productivity activities.”

Structural transformation is only possible with substantial and sustained investment over decades in new activities and products, not just in anti-poverty programmes.

Where the international economic system is hostile to investment in new, productivity enhancing economic activities is where its elements create obstacles to development.

One example of an externally based obstacle is aid volatility which has been shown to have highly negative impacts on macroeconomic performance and domestic investment.

Capital and technological investments are required to overcome the enormous productivity gap between developing and developed countries which characterises the world economy.

In 2008, a ratio of the average Gross National Income (GNI) per worker in the countries of the Organisation for Economic Cooperation and Development (OECD) versus those in the least developed countries (LDCs) was 22:1 in favour of the OECD countries.

This imbalance has worsened by a factor of five in comparison to the earliest days of capitalist development. In the nineteenth century, taking the Netherlands and the United Kingdom as the richest countries and Finland and Japan as the poorest, the productivity gap was only between 2 to 1 and 4 to 1.

The international economic system is lacking crucial mechanisms for delivering long-term, stable resources required by developing countries to upgrade their capabilities.

Dependence on commodity exports sustains the productivity gap between developed and developing countries.

Abundant global liquidity and growing trade imbalances fuelled a commodity boom in the 2000s which benefited many developing countries, including many LDCs.

All previous global liquidity booms had ended with serious economic crises in developing countries. The more recent commodity price boom did not introduce an enduring improvement in macroeconomic balances, especially for low-income countries (LICs).

While in the 2000s LDCs experienced the strongest growth rates since 1970s, according to UNCTAD, more than one-quarter of LDCs actually saw GDP per capita decline or grow slowly in the 2002-2007 global boom.

Even the middle income region of Latin America presents evidence of insignificant structural improvement in fiscal and current account balances.

Previous commodity boom periods had similarly not been an occasion for structural change in LDCs. UNCTAD suggests that between the 1970s and 1997, manufacturing as a proportion of GDP increased by less than two percentage points in LDCs as a group, a period which saw various episodes of commodity and global liquidity booms.

When considering LDCs from Africa alone and including Haiti, manufacturing fell from 11 to 8 percent during the same period.

Developing countries had extensively liberalised their trade regimes in the 1980s. In the aftermath, UNCTAD finds that some LDCs have more open trade regimes than other developing countries, and others are more open than even developed countries.

These policies had been intended to facilitate economic diversification. Instead of the expected outcome, greater trade liberalisation has been accompanied by greater concentration in the structure of exports.

The international economic system labours under the constraint that the highest decision-making bodies in key institutions, such as the International Monetary Fund (IMF), do not provide sufficient voting weight and policy influence to countries most affected by their operations.

One effort under way but under enormous political obstruction is to update voting weights in line with the changed economic structure. Even the G20, where important developing countries sit, has been unable to advance progress. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  Click here for the Research Paper on which this column is based.

Excerpt:

By Roberto Savio
ROME, Oct 22 2014 (IPS)

The new European Commission looks more like an experiment in balancing opposite forces than an institution that is run by some kind of governance. It will probably end up being paralysed by internal conflicts, which is the last thing it needs.

During the Commission presided over by José Manuel Barroso (2004-2014), Europe has become more and more marginal in the international arena, bogged down by the internal division between the North and the South of Europe.

Roberto Savio

We are going back to a new Thirty Years’ War – which took place nearly five centuries ago – between Catholics and Protestants. Catholics are considered profligate spenders, and there is a moral approach to economics from the Protestant side.

The Germans, for example, have transformed debt into a financial “sin”.  The large majority of Germans support the stern position of their government that fiscal sacrifice is the only way to salvation, and the looming economic slowdown will only strengthen that feeling. As a result, the handling of Europe’s internal governance crisis has largely pushed Europe to the side lines of the world.

It is a mystery why it is in the interests of Europe to push Russia into a structural alliance with China and, in such a fragile moment, inflict on itself losses of trade and investment with Russia which could reach 40 billion euro next year.“We are going back to a new Thirty Years’ War – which took place nearly five centuries ago – between Catholics and Protestants. Catholics are considered profligate spenders, and there is a moral approach to economics from the Protestant side.”

The latest issue of the prestigious Foreign Affairs magazine – the bible of the U.S. elite – carries a long and detailed article on “Why the Ukraine Crisis is the West’s Fault” by Chicago academic John J. Mearsheimer, who documents how the offer to Ukraine to join the North Atlantic Treaty Organisation (NATO) was the last of a number of hostile steps that pushed Russian President Vladimir Putin to stop a clear process of encroachment.

Mearsheimer wonders how all this was in the long term interests of the United States, beyond some small circles, and why Europe followed. But politics now has only a short-term horizon, and priorities are becoming conditioned by that approach.

A good example is how European states (with the exception of the Nordic states), have been slashing their international cooperation budgets. Not only have Spain, Italy and Portugal – and of course Greece – practically eliminated their official development assistance (ODA) budgets, but France, Belgium and Austria have also been following suit. Meanwhile China has been investing heavily in Africa, Latin America and, of course, Asia where the term ‘cooperation’ would not be the most appropriate.

But the best example of Europe’s inability to be in sync with reality is the last cut in the Erasmus programme, which sends tens of thousands of students every year to another European country. Has it been overlooked that one million babies have been born to couples who met during their Erasmus scholarships, and that this programme is being cut at a moment when anti-Europe parties are sprouting everywhere?

In fact, education – and especially culture (and medical assistance) – are under a continuous reduction in spending. As Giulio Tremonti, Finance Minister under Italian Prime Minister Silvio Berlusconi, famously said, “you don’t eat with culture”.

The per capita budget for culture in southern Europe is now one-seventh that of northern Europe. Italy, which according to UNESCO holds 50 percent of Europe’s cultural heritage, has just decided in its latest budget to open up 100 jobs in the archaeological field with a gross monthly salary of 430 euro. In today’s market, this is half what a maid receives for 20 hours of work a week.

Italian politicians do not say so explicitly, but they believe that there is already such rich heritage that there is no need for further investment and, anyhow, the tourists continue to arrive. The budget for all Italian museums is close to the budget of the New York Metropolitan Museum … in the real world, this is like somebody who wants to live by showing the mummified body of his great grandmother for the price of a ticket!

It can be said that, in a moment of crisis, the budget for culture can be frozen because there are more urgent needs. But no need is more urgent than to keep Europe running in the international competition in order to ensure a future for its citizens. And yet, the budget for research and development, which is essential for staying in the race, is also being cut year by year.

Let us look at the situation since 2009. Spain has reduced investment in R&D by 40 percent, which has led to a 40 percent cut in financing for projects and a 30 percent cut in human resources. Italian universities have witnessed a total cut of 20 percent in spending which has meant a reduction of 80 percent in hiring and 100% in projects, while 40 percent of PhD courses have disappeared.

France has cut hiring in centres of research by 25 percent and in universities by 20 percent. Less than 10 percent of demand for projects receives financing because funds are no longer available.

Greece has cut budget for centres of research and universities by 50 percent since 2011, and has frozen the hiring of any new researchers.

In the same period in Portugal, universities and research centres have suffered a cut of 50 percent, the number of scholarships for PhDs has been cut by 40 percent and post-doctoral courses by 65 percent.

It is important to recall that the Lisbon Strategy, the action programme for jobs and growth adopted in 2000,  aimed to  make the European Union “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” by 2010. Not only were most of its objectives not achieved in 2010, but Europe continues to slide backwards. The Lisbon Strategy had set 3 percent of GNP for R&D, but southern Europe is now below 1.5 percent.

A notable exception is the United Kingdom. The current government, which works in strong synchronicity with the City and its industrial constituency, has funded a 6 billion euro “Innovation and Research Strategy for Growth” plan to the applause of the private sector.

China is steadily increasing steadily its R&D budget, which is now 3 percent (what the Lisbon Strategy had set for Europe), but it aims to reach 6 percent of GNP by 2020 and, in just seven years, China has become the largest producer of solar energy, bankrupting several U.S. and European companies.

Is cutting Europe’s future in international competition really in the interests of Germany? Or it is that politics are losing the view of the forest while they discuss how many trees to cut, to reach a compromise between the Catholics and the Protestants?

We are now making of economics a moral science, which makes of Europe an unusual world. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

Excerpt:

Moselyn Muchena, one of the girls being given a chance under the TechWomen initiative. Credit: Mary Kashumba/IPS

By Mary Kashumba
HARARE, Jul 10 2014 (IPS)

For 22-year-old Moselyn Muchena, a final year computer science student at the University of Zimbabwe, it seemed obvious to create a mobile application offering easy access to services in the local catering industry, largely because of the huge number of female entrepreneurs in that sector.

“The kinds of problems these women are going through inspired me to come up with an innovative application for the industry called ORDER NOW, through which they can [post] their menus and specials, as well as their location and the prices of items.

“The application is also interactive, allowing customers to share [their reviews] on other social networks platforms … and it offers a platform for feedback, which is vital for businesses,” Muchena told IPS. The app also allows for advertising.“We want to tap into the creative and innovative base of 52 percent of the population. Imagine what the world has lost in innovation due to the lack of or fewer women in these creative spaces” – TechWomen Zimbabwe

“I am grateful to get this opportunity to create a culinary application that can be used by restaurants, where mostly women dominate the field,” she said, adding that she hoped her app will have a global reach.

According to Farai Mutambanengwe, president of the Small to Medium Scale Enterprises Association of Zimbabwe, women dominate the catering industry in Zimbabwe. He told IPS that while the association had no actual analysis “on the number of women who are in the culinary industry compared with men, generally women continue to grow in dominating this field.”

Muchena sees herself as paving the way for other girls to enter the fields of science and technology. “Being the only girl doing computer science in my class, I used to feel like an outcast and it took me time to blend in to become part of the class and not ‘the woman’ in the class. I said to myself I would also pave the way for young girls who aspire to have a career in technological innovations.”

The young innovator is just one of over 100 girls and women aged between 10 and 23 who are creating innovative technologies to address community problems in Zimbabwe. They are part of a U.S. Department of State’s Bureau of Educational and Cultural Affairs initiative called TechWomen, a programme designed to empower, connect and support the next generation of women leaders in science, technology, engineering and mathematics (STEM).

Referring to her own experience in developing her software, Muchena pointed out that there was an urgent need for investors in the field of science. “Our plight as young science entrepreneurs is that there are no investors willing to engage youths who are coming up with innovations.” However, lack of investment in the science sector has dwindled as a result of a restrictive economy.

According to a 2008 report in the Economic Reform Feature Service  of the Centre for International Enterprise (CIPE), “the education system in Zimbabwe has long suffered from an insufficient focus on teaching practical skills, limited access to higher education opportunities, and unequal access for girls to specialised fields such as science.”

“Successful educational reform is a necessary step to create the basis for sustained economic growth and requires the involvement of all stakeholders, ranging from families and civil society into national and local governments as well as the private sector,” said the report.

National Zimbabwean statistics for 2012 show that the number of women who enrolled in faculties of engineering, computer science and science technology at university level were 17 percent, 35 percent and 22 percent respectively in 2009. A year later, women’s enrolment in these faculties were 17. 5 percent, 39 percent and 18 percent respectively.

Chemical technologist Aretha Mare, one of the members of TechWomen Zimbabwe, founded by five Zimbabwean women who graduated from the U.S. State Department’s TechWomen initiative, told IPS that its vision is to see gender parity, or 50 percent representation of women in all STEM professions.

“We want to tap into the creative and innovative base of 52 percent of the population,” says TechWomen Zimbabwe. “Imagine what the world has lost in innovation due to the lack of or fewer women in these creative spaces.”

Mare said that under the TechWomen initiative, “the women act as role models, mentors and teachers, creating a networking platform and peer-to-peer interaction with sharing of knowledge to keep them motivated and sharing of opportunities, thus avoiding the leaky pipe where a few women who pursue STEM careers also switch careers or leave due to frustrations in the workplace.”

According to Mare, “the girls’ programme aims to expose girls to STEM fields through experiential learning, where they identify problems, use STEM to solve them, recalibrate and ideate again. We try to do it in hands on, fun and engaging way.”

“We believe we are causing a revolution, transitioning Zimbabwe into a tech power house through girls and women as we target girls from marginalised backgrounds (both in school and out of school), some of them with no prior computer experience and most with limited access to technology. So far we have trained over 100 girls,” she added.

Meanwhile, under its Strategic Plan (2011-2015), Zimbabwe’s Ministry of Primary and Secondary Education in partnership with the U.N. Children’s Fund (UNICEF) has embarked on a massive programme to revive science teaching in the country. The programme is being funded through the Education Development Fund (EDF), a multi-donor funding mechanism.

The programme has already distributed 2,449 sciences kits and is currently working on the re-training of more than 5,000 science teachers from the 2,336 secondary schools in the country on the safe use and maintenance of the equipment in the kits.

For Muchena, it all comes down to convincing parents and the government to strive to ensure that talent is given a chance. “I encourage parents and the authorities to understand that sometimes it is not about the academic aspects but about realising a child’s ability and nurturing it into something big.”

Malawi has opened up negotiations on the economic partnership agreement (EPA) with the European Union, which have been deadlocked since 2002.

The new round of negotiations may see President Joyce Banda’s administration change the status quo and sign the free trade agreement.

“We have opened up negotiations and consultations on EPAs. We can’t ignore the issue anymore like the previous administration, and President Banda will pay attention to this,” said the country’s trade minister John Bande.

A classroom block of a school in the capital Lilongwe. The government’s current position is that an EPA would have to push development. Credit: Mabvuto Banda/IPS

The EU extended the deadline for African, Caribbean and Pacific (ACP) countries, which includes Malawi, to negotiate the EPAs from 2014 to 2016.

President Bingu wa Mutharika, who died after a heart attack in April this year, had refused to sign the agreement, demanding that rural roads, health and education facilities be taken care of before signing an EPA.

Mutharika, a former U.N. trade expert, believed that the EPA would reinforce Malawi’s position as an exporter of low-value agriculture commodities, deprive government of policy space to use tariffs to protect livelihoods, and grow the manufacturing sector.

But the new administration is reviewing all the arguments against the EPA, shifting focus on what the country stands to gain from the agreement.

“We are reviewing our position on EPA because we want to also look at the potential benefits of signing the EPA, and development will still be at the heart of our negotiations because Malawi is facing supply-side constraints which have had an impact on our competitiveness,” Bande said.

This, he said, will form the basis of the final decision.

Malawi is negotiating an EPA under the Eastern and Southern African grouping which is negotiating in six clusters; development issues, market access, agriculture, trade in services, fisheries and trade- related issues.

President Banda is in Brussels this week attending the European Development Day. She is expected to discuss the future of the EPA with Karel De Gucht, the European commissioner for trade.

EU ambassador to Malawi Alexander Baum said that the meeting between President Banda and Commissioner De Gucht would be a political discussion on how to move forward.

“It seems the former administration did not understand the agreement and did not see any need to sign it…all her neighbours are benefiting from the European market and if the country is really to turn into a predominantly exporting country then this is the right opportunity,” Baum said.

Malawi, said Baum, takes about 0.01 percent of Europe’s goods, while Europe buys almost 30 percent of Malawian products.

Geoff Mkandawire, chairman of the National Working Group on Trade Policy, believes the EPA would be good for the sugar industry.

“Malawi is generally a lower-cost producer of agriculture products and goods, and access to EU markets would create a basis for further investments in the sugar industry,” Mkandawire said.

But the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), a grouping of the local private sector, does not see the EPAs in their current form as benefiting Malawi.

“EPAs are an important agent for development for ACP countries that leverage on trade with the EU. The downside is that the capacity of business in ACP countries is not strong enough to face the reality of opening the markets,” said Chancellor Kaferapanjira, CEO for MCCCI

He said the negotiations should recognise the differences in capacity with regard to trade, as well as the assistance needed to enable ACPs to effectively trade with the EU.

Several local civil society groups believe the EPA would have negative effects on Malawi’s trade with other countries in the region and undermine the regional integration processes.

If Malawi signs the agreement, it will be another major policy shift by President Banda, who has rolled back repressive legislation by her mercurial predecessor Mutharika and removed the Kwacha peg against the dollar since she took office.

The World Bank has rejected a call to suspend its involvement in large scale agricultural land acquisition following the release of a major report by the international aid agency Oxfam on the negative impact of international land speculation in developing countries.

“We share the concerns Oxfam raised in their report,” the bank stated in an unusually lengthy public rebuttal to the Oxfam Report. “However, we disagree with Oxfam’s call for a moratorium on World Bank Group…investments in land intensive large-scale agricultural enterprises, especially during a time of rapidly rising global food prices.”

“A moratorium focused on the Bank Group targets precisely those stakeholders doing the most to improve practices – progressive governments, investors, and us. Taking such a step would do nothing to help reduce the instances of abusive practices and would likely deter responsible investors willing to apply our high standards,” the rebuttal said.

In 2011, Sylvia Meltina’s family could no longer afford regular meals because of rising food and fuel costs. Credit: Peter Kahare/IPS

Over the past year, aid agencies, local non-governmental organisations (NGOs) and development watchdogs have warned that international investors are increasingly engaging in massive and sometimes predatory land deals in the developing world, particularly in Africa. These acquisitions are partly to blame for rising food insecurity.

Food prices are once again nearing record highs. In late August, the World Bank warned that due to adverse weather in parts of Europe and the United States, the global cost of certain staple crops was approaching levels last seen in 2008.

Ironically, multinational companies interested in growing food crops to address this need have been doing much of the recent investing. According to Oxfam, however, two-thirds of the investments made between 2000 and 2010 were exclusively for export-oriented crops, while other lands are being used to meet the increasing international demand for biofuels.

“Already an area of land the size of London is being sold to foreign investors every six days in poor countries,” Oxfam stated, noting that in Liberia, land deals have “swallowed up” 30 percent of the country over the past five years.

The report did not reject what good can potentially result from private investment but warned that food-price spikes from 2008 to 2009 led to the tripling of land deals, as “land was increasingly viewed as a profitable investment” even though it largely failed to benefit local communities.

Slow the speculation

“The world is facing an unbridled land rush that is exposing poor people to hunger, violence and the threat of a lifetime in poverty. The World Bank is in a unique position to stop this,” Jeremy Hobbs, Oxfam’s executive director, said Thursday, noting that the bank both invests in land and advises developing countries.

Oxfam is calling on the World Bank to temporarily halt its investments in agricultural land to give it time to review the advice it offers developing countries, and to put in place stronger policies to slow or stop the speculation and “land-grabbing” projects in which it is said to be involved.

World Bank investment in agriculture has reportedly tripled in the past decade. Since 2008, however, local communities have also brought 21 formal complaints against bank-funded projects that they say have violated their rights.

In a way, the bank’s response to the call for a moratorium demonstrated outright denial: “The Bank Group does not support speculative land investments or acquisitions which take advantage of weak institutions in developing countries or which disregard principles of responsible agricultural investment.”

The bank also noted that 90 percent of its agricultural investment is focused on smallholders, and that the agricultural work of its private-sector arm, the International Finance Corporation (IFC), has provided 37,000 jobs. By 2050, it warned, the global population is set to grow by two billion people, requiring a 70 percent increase in global food production.

Still, the bank recognised that its massive systems are imperfect and highlighted an upcoming overhaul of related guidelines that would “review and update its environmental and social safeguards policies”.

“We agree that instances of abuse do exist, particularly in countries where governance is weak, and we share Oxfam’s belief that in many cases, practices need to ensure more transparent and inclusive participation in cases of land transfers,” the rebuttal stated.

Impetus from below

The degree to which these safeguards are followed nevertheless remains voluntary, said Anuradha Mittal, the executive director of the Oakland Institute, a U.S.-based think tank that has been at the forefront of recent civil society warnings about the effects of land speculation in the developing world.

“Back in 2009 and 2010, we were clearly identifying the role that the World Bank Group has been playing in promoting and facilitating these large-scale investments, completely ignoring the social and economic impact,” she told IPS, referring to two reports (available here and here) that the new Oxfam work builds upon.

“Oxfam is reiterating that this kind of investment is misinvestment in communities, in agriculture, and unfortunately the bank is choosing to ignore the clear evidence that has been brought forward.” Bank officials did not respond to requests for additional comment.

Mittal said that the development discussion needs to focus less on prescriptions handed down from multilaterals and more on the national implementation of internationally agreed rights including the rights to food and to free and prior informed consent.

“We’re not interested in voluntary guidelines coming from Washington or Geneva, but rather in strengthening local and national capacities that help communities work best themselves,” she said. “Each country in Africa, for instance, is in a unique situation. So what we need are real consultations at the local level to see what kind of development actually works for the local populations.”

While Oxfam had called on the World Bank to move to halt its involvement in land deals before the annual meetings between the bank and the International Monetary Fund (IMF), in Tokyo next week, the bank’s new president is now suggesting that he will use the meetings to begin pushing substantial reforms aimed at holding the bank’s anti-poverty approaches more to account.

“If we are going to be really serious about ending poverty earlier than currently projected…there are going to have to be some changes in the way we run the institution,” World Bank President Jim Yong Kim, preparing to attend his first annual meetings, told journalists on Thursday.

Kim said he would be pushing for a model “where our board and our governors focus much more on holding us accountable for results on the ground in countries, rather than focusing so much on approval of large loans”.

Uganda’s Mandela National Stadium, commonly referred to as Namboole, and located 10 kilometres from the country’s capital, Kampala, was built by the Chinese. Credit: Ronald Kabuubi/IPS

By Fred Ojambo
KAMPALA, Sep 21 2012 (IPS)

Almost a decade since Uganda initiated negotiations with China for the favourable export of coffee beans to the Asian giant, it is struggling to create even trade relations with the world’s second-biggest economy. But economic experts predict that the East African nation could close the gap through the promotion of agriculture and the eventual export of oil.

“Although there is an imbalance currently, the gap will narrow as there are efforts to diversify Uganda’s export base,” Stephen Kaboyo, the managing director of Alpha Partners, a financial research company in the capital, Kampala, said in an interview with IPS.

“China is a high consumption nation with a mass market, and agricultural commodities and oil will have potentially large markets there. Already China’s demand for oil is so huge that its demand controls the pricing of this commodity,” he added.

In 2004, Uganda negotiated a preferential treatment agreement for its coffee exports to China, leading into the formation of Uganda Crane Coffee, a joint venture between the Uganda Coffee Development Authority and the Beijing North Star Industrial Group, for the promotion of the East African nation’s beans in the world’s most populous nation.

At least 2,200 tonnes of coffee beans worth 7.6 million dollars were exported to China in the first half of 2010, according to figures from the Ugandan embassy in China. Uganda, which is Africa’s second-biggest producer of the beans after Ethiopia, exports around 180,000 tonnes of coffee beans mainly to Europe annually.

Concerted promotion of Uganda’s other exports to China, including the diversification of products like cocoa, cotton, wood, copper concentrates, and hides and skins, saw the value of shipments soar from 15,000 dollars in 2003 to 26.71 million dollars in 2011, according to figures from the state-run Uganda Bureau of Statistics.

But the Chinese government has a different total. Chinese Ambassador Zhao Yali estimates that Uganda’s imports to his country totalled 40 million dollars last year.

This pales in comparison, however, to China’s exports, which have grown in the last decade. The Asian country was Uganda’s third-biggest source of imports last year, with goods valued at 522.5 million dollars, compared to 70.2 million dollars worth of imports nine years ago.

China remains a preferred source of imports for Uganda because of “competitive prices and very adaptive products,” Moses Kalule, the chief executive of Kampala City Traders Association, told IPS in a phone interview.

Footwear, textiles, motorcycles and parts, bicycles, rubber items, pharmaceuticals, and telecommunication, electronic, and medical equipment, are some of the major imports from the Asian nation, according to China’s Ministry of Commerce.

The entry of the Chinese into petty trade in this country favoured them since they could cheaply procure goods from their homeland to the disadvantage of Ugandans importing the same range of products from China, Kalule said.

But the control of Chinese engaging in petty trade has erased unfair competition that locals faced against them, he said. He would not elaborate on the controls.

Issa Sekitto, the spokesperson of the Kampala City Traders Association, said that the body had been collaborating with immigration authorities to monitor Chinese engaging in petty trade. Currently, the investor threshold in Uganda is 100,000 dollars, but he said that a number of Chinese had forgone investing and instead merely engaged in petty trade. In July, local traders protested against the situation, claiming that the Chinese had kicked them out of business.

India remains Uganda’s biggest trade partner, exporting goods worth 928.08 million dollars to this East African nation. Kenya is its second-biggest trade partner, exporting goods valued at 671.61 million dollars to this country, according to the Uganda Bureau of Statistics.

But Uganda is keen to grow its exports to China at an average annual rate of 25 percent, Kaboyo said.

Uganda can boost its exports to China if it enhances agricultural productivity, especially for commodities that are in demand in China, Paul Mugerwa, an economics lecturer at Uganda’s Bugema University, told IPS.

“The government should come up with a strategy to promote agriculture for the Chinese market as we have productive capacity in this area,” he said.

China is not only a source of imports for this East African nation but a source of foreign direct investment as well. The Asian nation was the leading source of licensed planned investments here from 2009 to 2010, according to the Uganda Investment Authority.

China accounted for 31 planned projects worth 246 million dollars in leather tanning, food processing, information and communication technology and real estate, according to the Uganda Investment Authority.

Successful Chinese investment from 1993 to 2011 amounted to 596 million dollars, with 265 companies from the Asian giant operating in Uganda and providing at least 280,000 jobs, the state-run New Vision, Uganda’s leading daily, quoted Yali as saying on Feb. 24.

“Uganda can improve its trade imbalance with China with more exports, while Chinese investors can lift Uganda’s narrow industrial base,” Lawrence Bategeka, a principal researcher at the country’s Economic Policy Research Centre, told IPS.

Yanli Ren, the second secretary at the Chinese embassy in Uganda, agreed: “Chinese companies are involved in construction and manufacturing in Uganda because policies favour their investments. These factories will help Uganda reduce its imports.”

The 2006 discovery of crude oil and a host of other minerals in Uganda are expected to enhance Chinese investment in the country and narrow the trade imbalance between the two nations.

“The discovery of oil and abundant mineral resources will definitely see a lot more players (in the Ugandan economy), including Chinese companies,” Arthur Nsiko, a researcher with the investment bank African Alliance Uganda Ltd., told IPS.

“Oil will reduce the country’s overall trade deficit since it accounts for about eight percent of the country’s imports,” he said.

The China National Offshore Oil Corporation or CNOOC is already involved in the development of Uganda’s oilfields after it acquired a third of interests in two oil blocks from the London-based Tullow Oil Plc in February. CNOOC and France’s Total SA paid a combined 2.9 billion dollars in shares in the two oil blocks.

Uganda may start oil production in 2014 with an initial 10,000 barrels per day for power generation, according to the government. Partial completion of a refinery will be achieved in 2015 with its capacity expected to reach 60,000 barrels a day, the government says.

(*Adds reaction from the spokesperson of the Kampala City Traders Association. Story first moved at 08.13 GMT Sep. 19, 2012)

Painter Karim Traore, 40, puts the finishing touches on a gate at a newly refurbished university in Abidjan. Credit: Robbie Corey-Boulet/IPS

By Robbie Corey-Boulet
ABIDJAN, Sep 4 2012 (IPS)

Yacouba Coulibaly was pursuing a doctorate in education at Cocody University in Abidjan before Côte d’Ivoire’s post-election violence started in 2010. But his classes were routinely disrupted by armed members of a powerful student federation that wished to hold meetings instead.

Later, the country’s public universities were closed in 2011 at the end of the post-election violence and Coulibaly was unable to continue his studies.

But now he is one of an estimated 61,000 students who are expected to start classes soon in the new academic year, as the country’s five public universities reopened on Monday Sep. 3.

“I hope we will have a peaceful university, where people do not behave like we’ve seen in the past,” he told IPS.

“I don’t want my younger brothers and sisters to suffer this same way,” he said, referring to the West African nation’s future crop of students.

Coulibaly said that the reopening of the universities, marked by a ceremony on Monday at Cocody University (which has been renamed after the country’s founding president, Felix Houphouet-Boigny), would help the country develop.

“When you see a country without universities, there is something wrong. You cannot talk about development without universities,” he said.

Côte d’Ivoire’s President Alassane Ouattara is also hoping that large-scale investment in the education sector can help his country’s universities shed a legacy of violence and corruption that contributed to recent turmoil. But concerns persist that higher education could again be corrupted by politics.

Speaking at Monday’s ceremony, Ouattara pledged to nurture a university system that would rival the best in the world, and also vowed to implement reforms at the primary and secondary levels.

“As an economist, I am convinced that investment in universities brings the highest yield in development,” he said.

The president lamented the role universities played in the nation’s 2010 to 2011 post-election crisis. He said they had become places “of violence and corruption” during the administration of former President Laurent Gbagbo.

Ouattara defeated Gbagbo in the November 2010 election, but the incumbent refused to cede office, sparking violence that claimed at least 3,000 lives. Gbagbo, who has since been transferred to the International Criminal Court at The Hague, used to be a professor. He garnered strong support from university faculties and the Student Federation of Côte d’Ivoire (FESCI).

For years leading up to the violence, FESCI had become associated with extortion and racketeering, often resorting to violence. A 2008 Human Rights Watch (HRW) report implicated FESCI members in assault, extortion and rape, saying members targeted Gbagbo’s political opponents with impunity. HRW and other groups have also said FESCI members were involved in the 2010-2011 conflict.

Augustin Mian, FESCI’s secretary general, told IPS the group had been turned into a scapegoat for the country’s past problems, and claimed FESCI members have been targeted for abuse by pro-Ouattara forces since the conflict ended.

“We are protesting against the fact that people say we are militias,” he said. He added that the group would continue to advocate on behalf of students, and planned to protest a pending increase in registration fees.

Ouattara has defended the move to close the universities in the first place, which was unpopular with many Ivorians.

Rene Legre Houkou, president of the Ivorian Human Rights League, was among those who thought the decision wrong.

“For us, this decision stopped the normal process of teaching and training,” he told IPS.

“We thought that this violated the right to education, and we were worried that all of these students would be left doing nothing.”

Houkou said officials would face a number of challenges as the universities resumed classes, including finding replacements for the many professors who were allies of Gbagbo and are now in exile.

Meanwhile, students in Abidjan said they hoped the five university campuses – refurbished at a cost of roughly 210 million dollars – would be peaceful from now on.

Most students said they were just happy the existing universities were open again. Kone Pranhoro, a 30-year-old pursuing a PhD in economics, said it was “a good opportunity for the future generation.”

“We hope that politics will never be involved in the universities again,” he said.

Money changing hands will soon be a thing of the past as East Africa standardises an electronic payment system. Credit Miriam Gathigah/IPS

By Miriam Gathigah
NAIROBI, Jul 17 2012 (IPS)

For months now East Africans have been expectantly waiting for an economic revolution to begin as they anticipate the launch of a new standardised payment system that will integrate the electronic transfer of money in the region. But continued delays in the launch of the system have economists fearing that the weak financial infrastructure here is hindering its implementation.

The system, a replica of the Single Euro European Payments Area (SEPA), will make all electronic payments in the East African Community (EAC) domestic ones through harmonised laws, policies and regulations within the region.

Although people still make electronic payments across the region, it is often insecure. Currently, cross border transfers in East Africa also take a number of days to be processed.

But when finally launched, the system will be unprecedented in Africa. Not even the Southern African Custom Union, the world’s oldest union, has a common electronic payment system in place. Sources say that it will eventually lead to the creation of one central bank for Kenya, Uganda, Tanzania, Rwanda and Burundi, the countries involved in the formation of the system.

“This system is a step forward towards the establishment of one central bank in the region, as well as one common currency,” Dr. Danson Mwangangi, an economist and market researcher in East Africa, told IPS.

And it is also about integrating trade.

“This is about electronic transfers. A payment method that is increasingly becoming common as the East African Community continues to integrate trade,” explained an economist and policy analyst at the Central Bank of Kenya involved in the process, and who did not wish to be named.

But that future appears a long way off. Though the payment system was supposed to have been launched in April, it has yet to come into effect. And the Central Bank of Kenya, one of the architects of the project, has refused to divulge information about its progress or set a new launch date.

However, Dr. George Ntawagira, a Rwandese economist working in Kenya, told IPS that the delay could be because the region’s cash-based economy is characterised by weak financial infrastructure. At least 60 percent of all payments in EAC are made in cash, a system that is bulky, risky and often inefficient.

Ntawagira added that banking remained risky in the region as a significant number of banks in Kenya lose millions of shillings every year from illegal withdrawals by computer-savvy criminals.

“These kind of risks have to be minimised. Still, East Africans have great expectations for this system and there has been concern over the delay in the inception of it.

“But this is to be expected, the financial infrastructure is still too weak to support this system. One of the greatest challenges is the discrepancies in regulatory and supervisory frameworks.”

Meanwhile, Ntawagira said that most banks across East Africa still have different tax regimes that hinder financial integration.

He added that close supervision of all the banks in the region would be critical to the success of the system.

“Although it is rare to find supervisors across banks scrutinising each other, this is an important aspect of regional integration because weaknesses in one financial institution can be corrected to prevent it from putting the entire system at risk.”

Ntawagira was quick point out that even the highly successful M-PESA, a mobile phone system where a maximum of 500 dollars can be transferred from mobile phones to pay bills and accounts and even purchase airtime, faced numerous problems when first launched in 2007. This included issues of network connectivity and financial integration.

But, according to the World Bank, it has since become Africa’s success story and facilities payments totalling almost 320 million dollars a month in the region.

And economists still believe that the new electronic payment system will significantly change how money moves across the region’s borders. The system is expected to not only be more secure than the current banking structure, but also cheaper and more efficient.

“Currently, if you move to another country in East Africa, even temporarily, you will have to go through a number of complex procedures in order for you to open a new account in your new country.”

With the new electronic payment system, residents of East Africa will be able to continue using their existing bank accounts from their home countries while residing elsewhere in the region.

It is also hoped that the system will lead to increased investment.

“EAC has continued to struggle in their attempt to lure foreign direct investment (FDI). This has largely been due to poor infrastructure in all sectors, be it roads, financial and so on. This system might improve FDI,” economic analyst, Titus Mwakazi, told IPS by phone from Tanzania.

“An integrated financial market can enhance liberalisation of intra-trade, boost the development of viable projects, strengthen financial institutions, encourage innovation as well as the pooling together of scarce resources in the region,” he said.

Still, despite of the promise that an integrated financial system holds for the struggling EAC economy, it nonetheless still has with a number of challenges. This includes the issue of the uneven level of growth and sophistication in the banking sector in some countries like Rwanda and Burundi.

“Kenya has achieved a much higher level of growth compared to the other countries. A weak banking system in one country may compromise the success of the system by increasing the risk of cross border electronic transfer,” Mwangangi said.

Nyan Tuch in her temporary home in a camp outside of Aweil where she is living until the government provides her family with land. Credit: Jared Ferrie/IPS

By Jared Ferrie
JUBA, Jul 9 2012 (IPS)

The streets have been swept clean and lined with flags to mark the first anniversary of South Sudan’s independence. But cosmetic changes in the capital, Juba, mask deep concerns about the future of the world’s newest nation.

South Sudan’s first year of independence has been marred by violent clashes, food shortages, a refugee crisis and a faltering economy that threatens to halt development. As the nation celebrates its liberation from Sudan after a civil war that killed an estimated two million people, messages from the international community were decidedly muted.

“Looking back, the last year has clearly been a difficult one for the people of South Sudan,” Hilde Johnson, the United Nations secretary general’s special representative, told reporters in Juba on Friday, Jul. 6. “It’s been a tough start.”

In a strongly-worded statement read out at the United States embassy’s July 4 celebrations, Secretary of State Hillary Clinton warned that the country faces “significant challenges that threaten stability and prosperity.”

“Conflict and unresolved issues with Sudan and domestic inter-ethnic tensions have led to increased fighting and economic hardship, which threatens to compromise the very foundations upon which South Sudan’s future was to be built,” she said.

Much of South Sudan’s future was tied to oil. The country inherited three quarters of Sudan’s reserves when it separated, but the pipelines and processing facilities remain north of the border, along with the port that South Sudan needs to use to get its oil to market.

It was thought that the countries’ mutual interest in oil revenue would help foster a working relationship between the former civil war foes. But it has not worked out that way. Talks since independence have failed to yield an agreement on how much South Sudan should pay to ship its oil through Sudan. In late January, South Sudan shut down oil production after Sudan confiscated 815 million dollars worth of Southern crude, which it claimed was in lieu of unpaid fees.

South Sudan said it had no choice but to halt production because Sudan was “stealing” its oil. But in doing so, the government deprived itself of 98 percent of its revenue. Already greatly dependent on the international community for aid, donors are now concerned that South Sudan will now be unable to fund any development programmes or even pay public sector salaries, which could lead to civil unrest.

“We must not allow the large investments in agriculture, water, education and other services to be undone by the economic crisis and increase in conflict,” said Helen McElhinney, a policy advisor with Oxfam International. “The longer this crisis drags on, the greater the risk South Sudan’s development will slip backwards, and its vast potential will be unrealised.”

Alfred Lokuji, dean of Juba University’s Community and Rural Development Studies department, said an agreement to restart oil production would not solve South Sudan’s problems.

“Even if the oil were flowing, the fundamental problem remains – how to manage it, how to manage those resources,” he said.

Lokuji pointed out that South Sudan and Sudan split oil revenues 50-50 in the five years leading up to independence, but southerners have seen very little development. Instead, oil wealth has been squandered and stolen.

On May 3, President Salva Kiir wrote a letter to 75 former and current “senior” government officials asking them to return stolen public funds. He said that four billion dollars had been looted.

Lokuji said that the letter was unlikely to succeed in convincing people to return money lost to corruption, or to prevent officials from stealing more. He criticised the government for failing to bring charges against corrupt officials during South Sudan’s first year of independence.

“I’d say it has been a failure, a failure because we have been unable to get a hold of corruption, unable to put things in order, put institutions in order and get going,” he said.

Even as the economy stagnates after the loss of oil revenue, humanitarian needs are increasing. The number of people requiring food aid in 2012 doubled from the previous year to 2.4 million, according to the U.N. Some of those are people displaced by ethnic violence that is most pronounced in Jonglei, an eastern state bordering Ethiopia.

More than 1,000 people died in fighting between the Murle and Lou Nuer ethnic groups in Jonglei in 2011. At least 900 more died in clashes that began in late December and stretched to February, according to a May 25 report by the U.N. peacekeeping mission.

The report noted that U.N. surveillance flights had reported around 8,000 Lou Nuer marching toward Murle communities in the weeks leading up the December attacks. Despite advanced warning, “the government was slow to respond in any robust way.”

“Actions taken came too late and insufficient troops were deployed at the critical time,” the report said.

South Sudan is also struggling to cope with close to 200,000 refugees that have crossed the border from Sudan’s Blue Nile and Southern Kordofan states where the Khartoum government is fighting an insurgency. On Jul. 4, U.N. High Commissioner for Refugees Antonio Guterres warned that people are arriving “dangerously malnourished” to camps where “the threat from water born disease is high.”

In addition to refugees, about 375,000 southerners have returned from Sudan since October 2010, according to the International Organization for Migration. The government has promised to provide land to them but many remain in temporary camps.

In one camp outside of Aweil, the capital of Bahr El Ghazal state, 50-year-old Nyan Tuch has been waiting almost 20 months for the government to give her family a plot of land. She lived for four decades in Sudan where she and her husband were both employed and owned a house. As the referendum on whether the south would separate loomed, tensions increased and they decided to return to their homeland.

Tuch and her husband now live in a thatched hut with a tarpaulin roof and they farm vegetables to survive. But she said she has no regrets about returning.

“I am filled with joy at one year independence it is now a country of our own,” she said. “What we are looking for is for the government to allocate our land. And we are hoping the place we have will be better than the place we left in the north because this is our place, we are proud of it.”

Experts say that underfunded pilot universal healthcare sites to be set up by South Africa as part of its proposed national health insurance may be doomed to fail as debate rages about how the move to more equitable healthcare will be funded.

In March, South Africa announced 10 districts across the country that will pilot universal healthcare under its proposed national health insurance (NHI).

Pilot sites have only been allocated an additional R11 million (or 1.3 million dollars) to implement the NHI, according to Di McIntyre, professor at the School of Public Health and Family Medicine at South Africa’s University of Cape Town.

“The NHI is actually about comprehensive reform of the healthcare system…you can’t do anything with R11 million,” said McIntyre, speaking at the South African National Health Assembly in Cape Town on Jul. 6.

“We have to apply pressure to the national treasury to actually start funding the rebuilding of the public health system.”

Researcher Daygen Eagan, with the South African pro-bono human rights law organisation, SECTION27, estimated that pilot sites could need at least several hundred million rands to roll out the necessary healthcare improvements as part of the pilot, including district-based interventions to reduce maternal and child mortality, and expanded school-based health service.

South Africa released a draft policy document on the NHI in August 2011, and is hoping universal healthcare will not only increase access but also improve health outcomes and value for money.

According to the World Health Organization (WHO), South Africa spends about 400 dollars per person on healthcare, roughly the same amount as Cuba but charts much poorer results for this investment than the island nation.

Maternal mortality in South Africa, for instance, is about seven times higher than that in Cuba, according to the WHO. Now, researchers say that not only are pilot sites underfunded but that they have serious concerns as to how the country will fund the NHI.

Who will foot the bill?

Government has proposed that the NHI be funded through a National Health Insurance Fund, a public entity outside of the Department of Health but accountable to government. This pool of money may be funded through increased health budget allocations from general tax, or though increased personal income tax or the value added tax (VAT) placed on most purchased goods, which many argue would allow the country to tap into its huge informal economy.

However, McIntyre warned that increasing VAT would shift the burden of funding the NHI to poorer households, while the middle class and wealthy have enjoyed successive cuts to personal income tax since the country ushered in democratic rule in 1994.

Associate researcher with the Alternative Information and Development Centre in Cape Town, Dick Forslund issued a similar warning regarding the possible introduction of a payroll tax. While taxes like these initially draw on private sector resources, employers quickly begin to factor these kinds of taxes into wage negotiations, shifting the to employees.

McIntyre argued that government’s draft policy document, or Green Paper, is deliberately ambiguous on the issue of NHI funding, largely because National Treasury – not the Department of Health – will ultimately decide how universal healthcare will be funded. She called on health activists to be strategic in advocacy around the NHI.

“Treasury is going to kill the NHI dead so (we) have to be strategic,” she told IPS. “At a minimum, we should be calling for no further tax reductions.”

Breaking the rules

Both McIntyre and Forslund argued that more could come from South Africa’s existing tax base.

“For most countries, 70 percent or more of healthcare costs comes from public funds,” McIntyre told IPS.

“In South Africa, about 40 percent of money spent on healthcare comes from public funds with contributions from private insurance companies representing as bit or bigger of a share and there’s still quite a bit that comes out of (patients’) pockets.”

Despite signing onto the 2001 Abuja Declaration, in which African governments pledged to commit 15 percent of national budget to health, South Africa currently dedicates about 12 percent of its national budget to health.

If South Africa is going to up the ante for health, Forslund said the country will have to abandon neo-liberal economic policies ushered in as part of the country’s negotiated settlement as part of its transition to democracy.

These policies dictate tax revenue should not exceed 25 percent of the country’s Gross Domestic Product (GDP), said Forslund, arguing that what he called the “25 percent rule” was a strategy by the former Apartheid government to ensure that the political revolution did not become an economic one.

But with increasing social welfare demands on the state, including commitments to free education and healthcare, South Africa will need to break its 25 percent rule.

“The 25 percent rule means a small state,” he said. “It’s a much more conservative percentage than even that applied in the United States.”

By 2025, the NHI’s cost will equate to about six percent of GDP, he estimated.

Finance Minister Pravin Gordon announced early this year that the National Treasury would release a discussion paper on NHI funding in April but has not yet done so.

The world’s nuclear weapons industry is being funded – and kept alive – by more than 300 banks, pension funds, insurance companies and asset managers in 30 countries, according to a new study.

And these institutions have substantial investments in nuclear arms producers.

Released by the International Campaign to Abolish Nuclear Weapons (ICAN), the 180-page study says that nuclear-armed nations spend over 100 billion dollars each year assembling new warheads, modernising old ones, and building ballistic missiles, bombers and submarines to launch them.

Much of this work, the report points out, is carried out by corporations such as BAE Systems and Babcock International in the UK, Lockheed Martin and Northrop Grumman in the United States, Thales and Safran in France, and Larsen & Toubro in India.

“Financial institutions invest in these companies by providing loans and purchasing shares and bonds,” says the report, described as the first of its kind.

Titled “Don’t Bank on the Bomb: The Global Financing of Nuclear Weapons Producers”, the study provides details of financial transactions with 20 companies heavily involved in the manufacture, maintenance and modernisation of U.S., British, French and Indian nuclear forces.

A coordinated global campaign for nuclear weapons divestment is urgently needed, it says.

Such a movement could help put a halt to modernisation programmes, strengthen the international norm against nuclear weapons, and build momentum towards negotiations on a universal nuclear weapons ban, it adds.

“Divestment from nuclear weapons companies is an effective way for the corporate world to advance the goal of nuclear abolition.”

The study appeals to financial institutions to stop investing in the nuclear arms industry.

“Any use of nuclear weapons would violate international law and have catastrophic humanitarian consequences. By investing in nuclear weapons producers, financial institutions are in effect facilitating the build-up of nuclear forces,” it says.

In a foreword to the report, Nobel Peace Prize winner Desmond Tutu
Writes, “No one should be profiting from this terrible industry of death, which threatens us all.”

The South African peace activist has urged financial institutions to do the right thing and assist, rather than impede, efforts to eliminate the threat of radioactive incineration, pointing out that divestment was a vital part of the successful campaign to end apartheid in South Africa.

The same tactic can – and must – be employed to challenge man’s most evil creation: the nuclear bomb, he added.

Tim Wright, ICAN campaign director and co-author of the report, told IPS some of the financial institutions identified in the study “have already indicated to us they intend to adopt policies proscribing investments in nuclear arms makers”.

Asked how confident he was of the success of the divestment campaign, Wright said, “Our divestment campaign will probably be most successful in places where opposition to nuclear weapons is strongest, for example, Japan and Scandinavia.”

He said more and more banks are coming to accept that some kind of ethical criteria should be applied to investment decisions, and manufacturing weapons capable of destroying entire cities in an instant is clearly unethical.

Of the 322 financial institutions identified in the report, about half are based in the United States and a third in Europe.

The study also singles out Asian, Australian and Middle Eastern institutions.

However, the institutions most heavily involved in financing nuclear arms makers include Bank of America, BlackRock and JP Morgan Chase in the United States; BNP Paribas in France; Allianz and Deutsche Bank in Germany; Mistubishi UJF Financial in Japan; BBVA and Banco Santander in Spain; Credit Suisse and UBS in Switzerland; and Barclays, HSBC, Lloyds and Royal Bank of Scotland in Britain.

The report emphasises the humanitarian, legal and environmental arguments for divestment, noting the unique destructive potential of nuclear weapons.

Asked if it would be feasible to launch a global campaign to boycott these financial institutions, Wright told IPS, “If banks refuse to divest, customers should seek ethical alternatives.”

There is no shortage of banks, particularly smaller banks, that refuse to have anything to do this this industry, he noted. “If people begin to leave en masse, this will send a powerful signal to the bank that its support for nuclear weapons companies is unacceptable.”

For multinational banks, he said, a coordinated boycott campaign in several countries could be effective.

The study also quotes Setsuko Thurlow, a survivor of the U.S. atomic bombing of Hiroshima in 1945, who points out that anyone with a bank account or pension fund has the power to choose to invest his or her money ethically in a way that does not contribute to this Earth-endangering enterprise.

In addition to stating the ethical case for divestment, the report also warns of the reputational risks associated with financing nuclear arms, and highlights the positive role that financial institutions could play in the quest for a world free from such weapons.

Peruvian peasant women working in the potato fields. Credit: Milagros Salazar/IPS

By Sabina Zaccaro
ROME, Feb 24 2012 (IPS)

As the links between food security and climate change become increasingly inextricable, the necessity for sustainable agriculture is now a universal concern.

Smallholder farmers in the global South – who suffer most from changes in climate patterns and the degradation of natural resources, since they live and work in the most vulnerable landscapes – are in urgent need of sustainable agricultural technologies, a reality that was recognised at the annual meeting of the International Fund for Agricultural Development (IFAD), which drew to a close in Rome on Thursday.

Despite ongoing economic and financial crises, developed and developing countries alike – represented by hundreds of development leaders and heads of state gathered in Rome for the 35th session of the Governing Council – committed 1.5 billion dollars to finance agriculture and rural development projects throughout the developing world.

During the two-day event, representatives from IFAD’s 167 member states addressed the connection between overcoming poverty and food insecurity, and discussed how to ensure food security to a growing population while simultaneously protecting the environment.

In December 2011, member states gave a boost to sustainable agriculture with 1.5 billion dollars in new contributions to IFAD.

Now, the U.N. agency says it is scaling up its efforts even further to better link climate-smart technologies and sustainable agriculture in more than 40 countries.

“To help implement IFAD’s environmental policy and climate change strategy, we have developed a groundbreaking initiative called the Adaptation for Smallholder Agriculture Programme, or ASAP, which will help channel (funds) into climate-smart, sustainable investments in poor, smallholder communities,” IFAD’s president Kanayo Nwanze announced in his opening statement at the conference.

Representatives of smallholders, family farmers, pastoralists and fishers from all over the world who gathered here ahead of the meeting called on leaders to jointly address the global challenges of food insecurity and climate change, and asked IFAD to place the needs of smallholders on the international agenda.

“One thing people need to understand is climate-smart agriculture,” Lindiwe Majele Sibanda, CEO of the Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN), told IPS.

“We have the imperative to feed more mouths so we need to intensify our food production systems but this has got to be done in a sustainable way.”

She added that, though the agricultural sector is responsible for a huge percentage of greenhouse gas emissions, it also has the potential to retain some of those gases in the soil.

Though science has adapted many new techniques, there is no “one science fits all”; rather, technologies need to fit local needs and conditions in a kind of “package”, Sibanda said.

“There is no point in making seed available when (farmers) cannot afford fertilisers.We need to have a systematic approach,” she said, echoing the view of numerous farmers’ networks that economic investments and the transfer of knowledge to farmers need to be combined in order to affect change on the ground.

“Then there is the key role of farmers themselves,” Sibanda said. “They must have the assets for farming but these have been depleted in most cases by recurring droughts and floods. We have not built enough mechanisms to make sure that we absorb the risk and empower the farmers.”

According to Sibanda, while the link between agriculture and food security is clear, there is too little talk about the farmer herself.

“We need to put people first, and those people are farmers, particularly women farmers.”

She stressed that investments must be targeted towards empower the people who form the nexus of the entire food production system.

“Without putting the people who do the farming at the centre of that dialogue there is no ‘agriculture’ to talk about,” she said.

“Since its mandate is to support small-scale and landless farmers, we have demanded that IFAD support agroecology as the model agricultural method to feed the people and to save the planet,” Henry Saragih chairman of the Indonesian Peasant Union (known by the acronym SPI) and coordinator of the global farmers’ network La Via Campesina, told IPS.

Saragih also believes that utilising farmers’ knowledge of sustainable technologies and innovations is crucial in order to empower and strengthen small family farmers and their markets.

On Tuesday, U.S. technology billionaire and philanthropist Bill Gates announced nearly 200 million dollars in grants to smallholder farmers, channelled through the Bill & Melinda Gates Foundation.

These new grants will support a number of initiatives including breaking down gender barriers so women farmers can increase productivity; controlling contamination that affects 25 percent of world food crops; and creating an innovative system to monitor the effects of agricultural productivity on the population and environment.

In a discussion with delegates this week, Rwandan President Paul Kagame emphasised smallholder farmers’ key role in producing more food and overcoming environmental constraints in his country, where agricultural gross domestic product (GDP) has grown at an average of 8 per cent annually, ensuring food security and higher incomes for farmers.

Kagame challenged other African nations to do more to help the growth of their agricultural sector.

Listing the ingredients for “good agricultural policies” in Africa, Sibanda said that strong countries are “those who have committed to developing an investment framework; those who have met their 10 percent target of the national budget for agriculture (as laid out in the 2003 Maputo Declaration on Agriculture and Food Security); those who have allowed their agricultural sector to grow at a minimum of six percent per year; and those who have done infrastructure development and knowledge management, (supplying) farmers with the public services they need.”

With the next round of climate change talks scheduled for June at Rio+20, the United Nations Conference on Sustainable Development in Brazil, all delegates agreed on the critical importance of smallholder agriculture for climate solutions.

Rio+20 marks twenty years since the inauguration of the historical conference in the same city that first launched the multilateral agenda for sustainable development. For the first time in two decades, agriculture has emerged as a critical component in the climate change issue.

“As we go to Rio, let’s make sure that everybody appreciates that there (can be no) sustainable development without (sustainable) agriculture,” Sibanda said, adding that, though people have been “scared” of climate change for years, there is now ample evidence of the worst that is yet to come.

“The time for sustainable development talk is now,” she said.

“Whether you’re in a developed country or in a developing country you’re going to be impacted. The fact that food security is now on the global agenda means that we will all have to see how best can we make it happen despite the challenges we face. We’re calling for more investments in agriculture because food is a sovereign right of people,” she concluded.

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