By Roberto Azevêdo
GENEVA, May 2 2015 (IPS)

Up to 80 percent of global trade is supported by some form of financing or credit insurance. Yet in many countries there is a lack of capacity in the financial sector to support trade, and also a lack of access to the international financial system. Therefore the ability of these countries to use simple instruments such as letters of credit is limited.

The impact of these limitations on a country’s trading potential can be very, very significant.

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

After the financial crisis, the supply of trade finance has largely returned to normal levels in the major markets, but not everywhere and not for everyone.

The structural difficulties of poor countries in accessing trade finance have not disappeared – indeed the situation may well have declined due to the effects of the crisis.

There are indications that markets are even more selective now. Under increased regulatory scrutiny, many institutions have lowered their risk-appetites and are focusing more on their established customers. Some are deliberately decreasing their number of clients in a so-called “flight to quality”.

In this environment, the lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most.

I was particularly struck by the fact that the financing gaps are the highest in the poorest countries, notably in Africa and Asia. And I was struck by the size of those gaps.

A survey by the African Development Bank of 300 banks operating in 45 African countries found that the market for trade finance was somewhere between 330 and 350 billion dollars.

It also found that this could be markedly higher if a significant share of the financing requested by traders had not been rejected.“The lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most”

Based on such rejections, the estimate for the value of unmet demand for trade finance in Africa is between 110 and 120 billion dollars.

This gap represents one-third of the existing market.

The main reasons for the rejection of requests for financing were:

• the lack of creditworthiness or poor credit history
• the insufficient limits granted by endorsing banks to local African issuing banks
• the small size of the balance sheets of African banks, and
• insufficient U.S. dollar liquidity

Some of these constraints are structural, and can only be addressed in the medium to long term. The retreat of global banks from Africa, and from other poor countries, is one such issue.

The Asian Development Bank conducted a similar survey in Asia, looking at countries like Viet Nam, Cambodia, Bangladesh, Pakistan and India.

According to preliminary estimates, the unmet demand there is around 800 billion dollars.

Small and medium-sized enterprises are the most credit-constrained as 50 percent of their requests for trade finance are estimated to be rejected. This is compared with just seven percent for multinational corporations.

Moreover, two-thirds of the companies surveyed reported that they did not seek alternatives for rejected transactions.

Therefore, these gaps may be exacerbated by a lack of awareness and familiarity among companies – particularly smaller ones – about the many options which exist.

A large majority of firms stated that they would benefit from greater financial education.

These findings are particularly striking as Africa and developing Asia are two areas of the world in which trade has grown fastest in the past decade.

But the potential evolution of new production networks is faster than the ability of the local financial sectors to support them.

In this way the lack of development of the financial sector can be a significant barrier to trade.

It can prevent developing countries from integrating into the trading system and accessing further trade opportunities.

And it can therefore prevent them from leveraging trade as a powerful source of development.

So we need to respond to this problem.

The exchanges that we have here can form part of this response. We need to join together in order to advocate action in this area and to devise practical solutions.

Of course, there is no magic bullet. This is a complex issue. However, that should not discourage our efforts.

The trade finance facilitation programmes that I outlined earlier are one example of practical action that we can take.

Of course this only fills part of the gap, so our response needs to be more fundamental.

In July this year, the United Nations’ major ‘Financing for Development’ conference will take place in Addis Ababa. And I think it is essential that we put trade finance on the agenda there.

In this way we can ensure that this issue is given its proper prominence in the development debate, especially at a time when the all-important U.N. Sustainable Development Goals are being finalised.

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:

“Poor and rural communities are disproportionately affected by the climate crisis. It is them – who did the least to create this problem – who are suffering the most from it”. Photo credit: UN Photo/Tim McKulka

By Dipti Bhatnagar and Susann Scherbarth
BRUSSELS/MAPUTO, Apr 1 2015 (IPS)

World governments expect to agree to a new global treaty to combat climate change in Paris in December. As the catastrophic impacts of climate change become more evident, so too escalates the urgency to act.

Mar. 31 should have marked a major milestone on the road to Paris, yet only a handful of countries acted on it. Unfortunately, the few plans that were announced before that date show that our leaders lack the ambition to do what it takes to tackle the climate crisis.

National plans for reduction of greenhouse gas emissions will most likely form the basis of the Paris agreement. These plans – known as Intended Nationally Determined Contributions (INDCs) – are meant to indicate a government’s self-stated commitment to solve the global climate crisis through domestic emission reductions as well as through support for the poorest and most vulnerable countries.“People on the frontline of climate impacts are burning while governments fiddle. People are paying and will pay for the devastation of climate change with their lives, livelihoods, wellbeing, communities and culture”

This architecture will result in an agreement that is weaker than each country being legally mandated to reduce emissions based on their fair share, determined through science and equity.

Yet, even with this architecture, the idea was that national governments would declare these plans by the end of March so that they could then be scrutinised.

Only six pledges had been received by the United Nations by the deadline – from the European Union, the United States, Norway, Mexico, Russia and Switzerland. These nations, with the notable exception of Mexico, are among the worst historical carbon emitters, yet these pledges do not reflect that immense historical responsibility and do not show any real willingness to address the scale of the climate crisis.

The commitments are well below what science and climate justice principles tell us is urgently needed to avoid hitting climate tipping points. The European Union announced target to cut emissions by ”at least 40 percent below 1990 levels by 2030” is merely re-hashed from last year’s announcement.

The United States has cobbled together a plan for a meagre reduction of 26 to 28 percent below 2005 levels, by 2025. If these insignificant pledges are an indication of what is to come, we are on track to a world which will be 4-6°C warmer on average. To put this into context, the climate impacts we are facing today are the consequence of a planet which is only 0.8°C warmer than it was.

So far, none of these countries’ announcements would contribute their ‘fair share’ according to science and equity. All parties are capable of much greater ambition, and it is high time to bring it to the table.

The deadlines that matter most are not set by governments, but by our planet and its natural boundaries, which have already been stretched considerably by the impacts of the climate crisis, for instance by the lethal and extreme weather events from Vanuatu to the Balkans to the Sahel.

Climate change is already happening now, bringing more floods, storms, droughts, rising seas and more devastating typhoons and hurricanes.

The mockery made of this latest Mar. 31 deadline is just another revelation of our governments’ inaction – under the influence of powerful polluting corporations – in the face of impending disaster.

People on the frontline of climate impacts are burning while governments fiddle. People are paying and will pay for the devastation of climate change with their lives, livelihoods, wellbeing, communities and culture.

Poor and rural communities are disproportionately affected by the climate crisis. It is them – who did the least to create this problem – who are suffering the most from it.

We need a just and drastic transformation of our societies, our energy and food systems, and our economies. Proven and workable alternatives exist and are already being implemented.

Key decisions about our energy systems are made regularly, and will of course be made long after the Paris summit. Take for instance U.S. President Barack Obama’s decision on the controversial Keystone XL pipeline, which would bring planet-wrecking tar sands oil from Canada to the Gulf of Mexico.

A decision is expected soon and a rejection of the pipeline project would send a strong signal that our long-term future is not founded on the exploitation and burning of more and more fossil fuels.

European Union governments announced their INDCs back in February with their new ‘Energy Union’ vision for meeting the region’s energy needs. The bloc has recognised the need to reduce energy consumption and help citizens take control of clean, local renewable sources. But these moves towards the good must not be negated with new investments in the bad – new gas pipelines are also on the menu.

Throughout 2015, Friends of the Earth International and others will be bringing more and more people together to fight against the power of the polluters and make sure politicians hear the voices of the voiceless and take real action.

In the run-up to Paris, and along the road beyond, we, together with thousands of others, will be promoting the wealth of real solutions and proven ideas that are already delivering transformation around the world.

We will be on the streets throughout 2015, in 2016, and as long as it takes to realise community-owned renewable energy solutions that benefit ordinary people, not multinational corporations.

The Paris deadline will come and go, like others before. But the energy transformation is under way and, whatever our governments will pledge or not pledge at the climate summit in Paris, the transformation will not be stopped.

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. 

* Dipti Bhatnagar is Climate Justice & Energy Co-coordinator for Friends of the Earth International, based in Maputo.

* Susann Scherbarth is Climate Justice & Energy Campaigner for Friends of the Earth Europe, based in Brussels.

Excerpt:

“There is no doubt that African small-scale producers need much greater support in their efforts, but GM seeds which are designed for large-scale industrial production have no place in smallholder systems”. Credit: La Via Campesina/2007/Creative Commons

By Haidee Swanby and Mariann Bassey Orovwuje
JOHANNESBURG, Mar 1 2015 (IPS)

The most persistent myth about genetically modified organisms (GMOs) is that they are necessary to feed a growing global population.

Highly effective marketing campaigns have drilled it into our heads that GMOs will produce more food on less land in an environmentally friendly manner. The mantra has been repeated so often that it is considered to be truth.

Now this mantra has come to Africa, sung by the United States administration and multinational corporations like Monsanto, seeking to open new markets for a product that has been rejected by so many others around the globe.“It may be tempting to believe that hunger can be solved with technology, but African social movements have pointed out that skewed power relations are the bedrock of hunger in Africa”

While many countries have implemented strict legal frameworks to regulate GMOs, African nations have struggled with the legal, scientific and infrastructural resources to do so.

This has delayed the introduction of GMOs into Africa, but it has also provided the proponents of GMOs with a plum opportunity to offer their assistance and, in the process, helping to craft laws on the continent that promote the introduction of barely regulated GMOs and create investor-friendly environments for agribusiness.

Their line is that African governments must adopt GMOs as a matter of urgency to deal with hunger and that laws implementing pesky and expensive safety measures, or requiring assessments of socio-economic impacts, will only act as obstructions.

To date only seven African countries have complete legal frameworks to deal with GMOs and only four – South Africa, Burkina Faso, Egypt and Sudan – have approved commercial cultivation of a GM crop.

The drive to open markets for GMOs in Africa is not only happening through “assistance” resulting in permissive legal frameworks for GMOs, but also through an array of “philanthropical” projects, most of them funded by the Bill and Melinda Gates Foundation.

One such project is Water Efficient Maize for Africa (WEMA), funded by the Gates Foundation in collaboration with Monsanto. Initially the project sought to develop drought tolerant maize varieties in five pilot countries but, as the project progressed, it incorporated one of Monsanto’s most lucrative commercial traits into the mix – MON810, which enables the plant to produce its own pesticide.

Interestingly, MON810 has recently come off patent, but Monsanto retains ownership when it is stacked with another gene, in this case, drought tolerant.

WEMA has provided a convenient vehicle for the introduction of Monsanto’s controversial product, but it has also used its influence to shape GM-related policy in the countries where it works.

The project has refused to run field trials in Tanzania and Mozambique until those countries amend their “strict liability” laws, which will make WEMA, and future companies selling GMOs, liable for any damages they may cause.

WEMA has also complained to governments about clauses in their law that require assessment of socio-economic impacts of GMOs, saying that assessment and approvals should be based solely on hard science, which is also often influenced or financed by the industry.

African civil society and smallholders’ organisations are fighting for the kind of biosafety legislation that will safeguard health and environment against the potential risks of GMOs, not the kind that promotes the introduction of this wholly inappropriate technology.

About 80 percent of Africa’s food is produced by smallholders, who seldom farm on more than five hectares of land and usually on much less.  The majority of these farmers are women, who have scant access to finance or secure land tenure.

That they still manage to provide the lion’s share of the continents’ food, usually without formal seed, chemicals, mechanisation, irrigation or subsidies, is testament to their resilience and innovation.

African farmers have a lot to lose from the introduction of GMOs – the rich diversity of African agriculture, its robust resilience and the social cohesion engendered through cultures of sharing and collective effort could be replaced by a handful of monotonous commodity crops owned by foreign masters. 

There is no doubt that African small-scale producers need much greater support in their efforts, but GM seeds which are designed for large-scale industrial production have no place in smallholder systems.

The mantra that GMOs are necessary for food security is hijacking the policy space that should be providing appropriate solutions for the poorest farmers.

Only a tiny fraction of farmers will ever afford the elite GM technology package – for example in South Africa, where over 85 percent of maize production is genetically modified, GM maize seed costs 2-5 times more than conventional seed, must be bought annually and requires the extensive use of toxic and expensive chemicals and fertilisers.

What is more, despite 16 years of cultivating GM maize, soya and cotton, South Africa’s food security continues to decline, with some 46 percent of the population categorised as food insecure.

It may be tempting to believe that hunger can be solved with technology, but African social movements have pointed out that skewed power relations – such as unfair trade agreements and subsidies that perennially entrench poverty, or the patenting of seed and imposition of expensive and patented technology onto the world’s most vulnerable and risk averse communities – are the bedrock of hunger in Africa.

Without changing these fundamental power relationships and handing control over food production to smallholders in Africa, hunger cannot be eradicated.

A global movement is growing and demanding that governments support small-scale food producers and “agro-ecology” instead of corporate agriculture, an agricultural system that is based on collaboration with nature and is appropriate for small-scale production, where producers are free to plant and exchange seeds and operate in strong local markets.

Edited by Phil Harris    

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

This opinion piece was originally published by Common Dreams.

Excerpt:

New analysis suggests that developing countries are losing a trillion dollars or more each year to tax evasion and corruption facilitated by lax laws in Western countries, raising pressure on global leaders to agree to broad new reforms at an international summit later this year.

These massive losses could be leading to as many as 3.6 million deaths a year, according to the ONE Campaign, an advocacy group that focuses on poverty alleviation in Africa. Recovering just part of this money in Sub-Saharan Africa, the organisation says, could allow for the education of 10 million more children“Whenever corruption is allowed to thrive, it inhibits private investment, reduces economic growth, increases the cost of doing business, and can lead to political instability. But in developing countries, corruption is a killer” – ONE Campaign
 a year, or provide some 165 million additional vaccines.

“Whenever corruption is allowed to thrive, it inhibits private investment, reduces economic growth, increases the cost of doing business, and can lead to political instability. But in developing countries, corruption is a killer,” a report on the findings, released Wednesday, states.

“When governments are deprived of their own resources to invest in health care, food security or essential infrastructure, it costs lives, and the biggest toll is on children.”

The new analysis focuses on a spectrum of money laundering, bribery and tax evasion by criminals as well as government officials. The lost money is not development aid but rather undeclared or siphoned-off business earnings – immense tax avoidance resulting in a decreased base from which governments can fund essential services.

International trade offers a key point of manipulation, the report says, with the extractive industries particularly vulnerable. In Africa alone, exports of natural resources grew by a factor of five in the decade leading up to 2012, offering clear prospects for growth alongside lucrative opportunities for corruption on a mass scale.

“Between 2002 and 2011 we saw an exponential increase in illicit financial flows across the globe,” Joseph Kraus, a transparency expert at the ONE Campaign, told IPS.

“Yet while we’re all familiar with corruption in developing countries, it takes two to tango – that money often ends up in the financial centres of the Global North. Those banks, lawyers and accountants are all essentially facilitators of that corruption, so in order to get at the root of this issue we need to go after the problems there.”

Real opportunity

Advocates including the ONE Campaign are currently stepping up pressure on industrialised countries to institute a series of across-the-board transparency measures. Some are aimed at corruption in developing countries, such as strengthening disclosure laws impacting on the extractives industry and bolstering “open data” standards to allow citizens increased oversight over their governments’ dealings.

Several other reforms would need to be carried out by developed countries, particularly those housing major financial centres such as the United States and United Kingdom. These would include new standards requiring governments to automatically exchange tax information, to mandate the publication of full information on corporate ownership, and to force multinational corporations to report on their earnings on a country-by-country basis.

In certain circles, such demands have been percolating for years. But current circumstances could offer unusual opportunity for such changes.

“In the last two years we’ve seen an acceleration of this agenda,” Kraus says. “Eighteen months ago, no one was talking about phantom firms or anonymous shell companies. But these issues have gained a lot of momentum in a short period of time, and there is real opportunity coming up.”

This new energy has been motivated particularly by concerns in advanced economies over shrinking government budgets in the aftermath of the global economic downturn. Yet developing countries arguably stand to benefit the most from substantive reforms, provided they’re structured accordingly.

Advocates of such changes are now looking ahead to a summit, on Nov 15 and 16 in Australia, of the members of the Group of 20 (G20) world’s largest advanced and emerging economies as well as two major meetings of finance ministers in the run-up to that event.

The G20 represent about two-thirds of the world’s population, 85 percent of global gross domestic product and over 75 percent of global trade.

The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.

The G20 has taken on a primary role in issues of global financial stability and, more recently, in pushing the automatic exchange of tax information between governments. A new global standard on such exchange could be approved by the G20 ministers in November, among other actions.

“For too long, G20 countries have turned a blind eye to massive financial outflows from developing countries which are channelled through offshore bank accounts and secret companies,” according to John Githongo, an anti-corruption campaigner in Kenya.

“Introducing smart policies could help end this trillion dollar scandal and reap massive benefits for our people at virtually no cost. The G20 should make those changes now.”

Coordinated response

In fact, many G20 countries have instituted some of these reforms on their own. The U.K. government, for instance, has taken unilateral action on publicising information on corporate ownership, while the United States was the first to pass strong transparency requirements for multinational extractives companies.

While such piecemeal national legislation can spur other countries to action, many feel only a comprehensive approach would have a chance at having a substantial impact. Further, many governments have pledged to act on these issues, but have yet to actually follow through.

“Illicit financial flows are a perfect example of a transnational problem, in that you have two legal regimes in which loopholes are being exploited,” Josh Simmons, a policy counsel at Global Financial Integrity, a Washington watchdog group that supplied data for the new ONE Campaign report, told IPS.

“So when an international cooperative body is able to identify these loopholes, they can get member countries to move in sync to address the situation. But if only one country tries to do so, businesses would probably just move elsewhere.”

Others are looking even more broadly than the G20. A paper released last month by researchers with the Center for Global Development, a think tank here, calls for the inclusion of anti-tax-evasion aims in the new global development goals currently being negotiated under the United Nations.

Indeed, even while there could be real movement at the G20 on several of these issues this year, the work on the other end of this equation – in developing countries – remains onerous.

“We need to get developing countries’ tax systems up to speed, strengthen their financial intelligence units and get their anti-laundering laws up to code. And that is proceeding, but much more under the radar given its complexity,” Simmons says.

“Still, that’s where people are actually bearing the brunt of this problem. Tax avoidance in the United States contributes to the national debt, but in developing countries it’s literally causing people to go hungry.”

Edited by Ronald Joshua