In the Pacific Islands, transportation, including cargo boats that ply the waters between islands, is heavily dependent on fossil fuels. Credit: Catherine Wilson/IPS

By Catherine Wilson
CANBERRA, Australia, May 6 2015 (IPS)

The recent dramatic fall in world oil prices, with Brent crude plummeting from a high of 115 dollars per barrel in June last year to around 47 dollars in January 2015, is beginning to benefit Pacific Islanders who are seeing lower prices for fuel and energy.

Although the global price per barrel inched up to 68 dollars in early May, regional experts continue to anticipate fiscal gains as the trend eases costs of government operations and service delivery.

“How and to what extent [Pacific Island governments] will be able to derive benefits from the dramatic oil price drop depends on how quickly they [...] channel public spending on infrastructure and other development programmes.” -- Dr. Dibyendu Maiti, associate professor at the School of Economics at the University of the South Pacific, Fiji
“There is evidence to suggest that reduced fuel costs are having some impact in all Pacific Island markets, at least through lower prices charged for fuel, but the impact on secondary markets, like food and transport, may take longer to be realised,” Alan Bartmanovich, Petroleum Adviser to the Secretariat of the Pacific Community (SPC) in Fiji, told IPS.

It will take time for the oil price drop to fully impact island governments and all economic sectors due to the length of supply chains and other factors, such as price fuel regulation within countries, he added.

A global oversupply of oil, due to a surge in United States production and decline in consumption driven by reduced growth in Europe and Asia, have been the main causes of the downward price trend.

The decision of the Organisation of Petroleum Exporting Countries (OPEC), including Saudi Arabia and Venezuela, which produces 40 percent of the world’s crude oil, to maintain its level of output has diminished the likelihood of prices soaring again quickly.

The Pacific Islands region is home to 10 million people living in 22 countries and territories totalling thousands of islands spread across 180 million square kilometres of the Pacific Ocean.

According to the World Bank, more than 20 percent of Pacific Islanders are unable to afford basic needs, while employment relative to population is a low 30-50 percent in Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Samoa, Tonga and Tuvalu.

Capitalising on lower oil prices will be vital to improving the lives and development outcomes of millions of people in this region, where the vast majority live in rural areas with little access to basic facilities and global job markets.

Many countries have embarked on plans to transition to renewable energy, but the region still depends heavily on fossil fuels, especially for power and transportation.

Fossil fuel imports amount to 10 percent of the region’s gross domestic product (GDP) and in five countries – the Cook Islands, Guam, Nauru, Niue and Tuvalu – diesel is still used for nearly all power generation.

Transporting oil long distances to small Pacific islands scattered across vast sea distances entails complex and costly supply chains. Further shipment to outer lying island provinces within countries can result in an additional 20-40 percent on the price of fuel for local consumers.

In Fiji, Maureen Penjueli, coordinator of the Pacific Network on Globalisation, a regional civil society organisation, said, “Only a month ago the people of Fiji started to enjoy the real benefits of the fall in oil prices, particularly at the gas pumps, but also for basic energy needs, such as kerosene.”

Since 2014, the price of diesel in Fiji, commonly used to fuel power generators, has dropped from 1.17 dollars to 0.82 dollars per litre in April this year.

Over the same period, the cost of kerosene has fallen from 1.09 dollars to 0.62 dollars per litre.

“The cost of kerosene coming down is significant as this benefit trickles right down to rural and urban areas where most people are dependent on it as a source of energy for cooking,” Penjueli continued.

The trend is welcomed in the region after soaring oil prices from 2002-2008 and the global financial crisis intensified fiscal pressures, costing many Pacific Island countries about 10 percent of their gross national incomes.

Rising inflation and worsening trade deficits impeded the capacity of governments to reduce poverty and deliver development programmes and public services.

Rural communities in the Solomon Islands use fossil fuels for transportation, such as motorized canoes. Catherine Wilson/IPS

At this time ordinary Pacific Islanders witnessed escalating food, electricity and transport costs. Between 2009 and 2010 some staple food prices increased by 50-100 percent in at least six Pacific Island countries.

In Vanuatu, the price of taro rose from 1.95 to 3.91 dollars and yams from 6.85 to 14.68 dollars. The purchasing power of family incomes shrunk, with the poorest often the worst hit.

But, according to Penjueli, food prices remain largely unaffected so far by fuel price reductions.

“The rationale is that there should be a drop in prices of both imported foods and local produce because transportation costs will come down, however, we really haven’t seen that benefit yet. Retail stores have not brought their prices down,” she said.

The World Bank claims that a decline of 10 percent in world oil prices is likely to boost economic growth in oil importing countries about 0.1-0.5 percentage points.

But while prices declined about 30-40 percent in 2014-15, current growth forecasts for the region remain modest. GDP growth in the Solomon Islands, Fiji and Vanuatu is predicted to remain the same from 2015-2016 at 3.5 percent, 2.5 percent and 3.2 percent respectively.

Global oil prices are forecasted to remain low during the course of this year and increase marginally in 2016.

Dr. Dibyendu Maiti, associate professor at the School of Economics at the University of the South Pacific, Fiji, emphasised it was important for Pacific Island governments to respond to the price shift.

“How and to what extent they [governments] will be able to derive benefits from the dramatic oil price drop depends on how quickly they adjust the inflation target and channel public spending on infrastructure and other development programmes.”

Some priorities include investing more in higher education and skills development and “encouraging the private sector to participate with more investment. This would have a long term spill-over effect […] such as raising employment,” Maiti told IPS.

Beyond the oil market, reducing the vulnerability of the Pacific Islands to economic shocks and alleviating the financial burden of fossil fuel imports demands that countries remain on course with plans to convert to locally generated renewable energy.

Three years ago, Tokelau, a tiny Polynesian territory in the central Pacific, led the way by converting to 100 percent renewable energy with a large off-grid solar system providing power to its population of 1,411.

It was a critical move toward sustainable development given Tokelau’s GDP is about 1.5 million dollars, while its annual fuel importation bill was around 754,000 dollars.

Edited by Kanya D’Almeida

Workers use electricity and firewood to prepare cassava bread in Canaries, St. Lucia. The country’s government says renewable energy can help with value-added in the agricultural sector. Credit: Kenton X. Chance/IPS

By Kenton X. Chance
CASTRIES, Feb 25 2015 (IPS)

At Plas Kassav, a roadside outlet in Canaries, a rural community in western St. Lucia, a busload of visitors from other Caribbean countries, along with tourists from North America and Europe, sample the 12 flavours of freshly baked cassava bread on sale.

In the back of the shop, employees busily sift the grated cassava and prepare it for baking. Next to them, an electric motor powers a device that turns grated cassava as it bakes into farine — a cereal made from cassava tubers — in a wood-fired cauldron.Caribbean nations, with their fossil fuel-dependant economies, “don't want to be caught in a situation where today the price of oil is less than 50 dollars a barrel and tomorrow, if the Saudis and the other players decide, that the price of oil could go up to 120 dollars a barrel.” -- Minister James Fletcher

This is one of the ways in which this eastern Caribbean nation of 180,000 people is marrying its tourism and agriculture sectors.

Tourism makes the largest contribution to St. Lucia’s 1.3-billion-dollar economy. And with oil prices expected to continue falling for some time, this 617-square-kilometre island is hoping for significant economic growth on the heels of the slim years since the global financial crisis struck in 2008.

The government says that the move toward renewable energy will see businesses and households paying less for energy and will also strengthen the nation’s argument at the international climate change negotiations.

A renewable energy expert with the International Renewable Energy Agency (IRENA) tells IPS that falling oil prices present an excellent opportunity for small island developing states such as St. Lucia and its 14 other Caribbean Community (CARICOM) allies to accelerate their renewable energy programme.

“I think you can look at it as a windfall that buys you time for the transition,” Dolf Gielen says.

He tells IPS that falling oil prices will slow down but will not end the push towards clean energy.

“Oil prices will somewhat slow the acceleration but you will see a continued transition towards renewables,” he says. “Now you have a little more time to plan it and to make sure that it functions well.”

James Fletcher, St. Lucia’s Minister of Public Service, Sustainable Development, Energy, Science and Technology, tells IPS that he agrees that the region needs to accelerate its transition toward renewable energy, but is not certain whether lower fuel prices is really reason to exhale.

“I’m not sure about the breathing space. I think what it does, however, show is that this fuel price game is not one we want to be playing,” Fletcher tells IPS.

He notes that while the price of oil has fallen to 50 dollars a barrel — less than half of what it was half year ago — the decrease did not result from any advances in technology.

“The price of oil right now is being determined by the geopolitics of oil,” he says, noting that Saudi Arabia has increased its production in an effort to make production of shale oil in the United States and Canada less attractive.

Fletcher says that Caribbean nations, with their fossil fuel-dependant economies, “don’t want to be caught in a situation where today the price of oil is less than 50 dollars a barrel and tomorrow, if the Saudis and the other players decide, that the price of oil could go up to 120 dollars a barrel.”

Cruise in Castries Harbour, St. Lucia. The island is hoping to use renewable energy to fuel a greater part of its tourism sector. Credit: Kenton X. Chance/IPS

If the Caribbean is really serious about sustainable development and wants its economies to develop with some level of certainty, “we can’t be at the mercy of a widely fluctuating oil market,” Fletcher stresses.

“So, for me, what is happening in the oil market is reason why, as much as possible, we should get either out of it or insulate ourselves from it – and that’s why renewable energy makes so much sense to us.”

As opposed to dependence on oil, Fletcher says, if Caribbean countries are depending on renewable energy then there is “much more certainty” of what the price of energy will be.

“… With prices fluctuating so much not because of any huge difference in technology and any difference in supply in the Middle East or any glut in the supply market, I think that’s why we should be getting pursuing our renewable energies programme with more haste and more energy,” Fletcher tells IPS.

In St. Lucia, consumers pay 38 cents for one kilowatt-hour of electricity. The government hopes that its investments in renewable energy could see that price reduced to 30 cents.

St. Lucia is home to Sulphur Sprints, the “world’s only drive in volcano” — a smoking caldera located near Soufrière on the southwestern side of the island, where the natural heat boils the water and geysers shoot into the air at high tide and full moon.

St. Lucia hopes to generate up to 30 megawatts of electricity in Soufriere, home to Sulphur Springs, the “world’s only drive-in volcano”. Credit: Kenton X. Chance/IPS

It stands to reason that geothermal energy will be the nation’s focus as it pivots to renewable energy.

Fletcher tells IPS wind and solar PV are intermittent sources of energy “and we really can’t complete a transition away from fossil fuel based on intermittent sources, unless we invest heavily in storage, which we really don’t have the capacity to do right now.”

St. Lucia has received financial and technical support from the government of New Zealand, SIDS-DOCK, and the Global Environmental Facility to conduct the initial stage of exploration, which will start soon, Fletcher says.

LUCILEC, the state-owned power company in St. Lucia, will purchase the electricity from the power plant developer, ORMAK of Isreal, and resell it to consumers.

Fletcher tells IPS that the government is pleased with the pace of the negotiations but notes that developing geothermal potential takes time.

“But at least it puts us on track to developing what we believe is as much as 30 megawatts of geothermal energy in Soufriere,” he says.

And while geothermal energy has been identified as the booster that St. Lucia’s tourism industry has been longing for, exploiting that same renewable energy potential could deal a devastating blow to the nation’s tourism product.

“There is one little wrinkle in that, because the drive-in volcano is also located within the Piton Management Area, and the Piton Management Area is a UNESCO World Heritage Site and it is located in one of the policy areas where we are restricted in the level of infrastructural development that can take place,” Fletcher explains.

“So what we will be doing is looking at drill sites outside of the immediate vicinity of the drive-in volcano, but we are quite confident that we will have quite productive wells outside of that immediate area.”

St. Lucia is also exploring the development of a 12-megawatt wind farm on the island’s east cost and has been having discussion with an entity in the United States in this regard.

The third element of the renewable energy push is solar PV, the first stage of which will be done by LUCILEC, which has invited responses to proposal for a 1.2-megawatt facility in the south of St. Lucia, the intention being that it will be scaled up to 3 megawatts in the near future.

In this regard, the government is working with the Carbon War Room and the Clinton Initiative, which have been supporting the renewable energy programme.

Fletcher tells IPS that the move toward renewable energy, coupled with energy saving initiatives — such reducing from 4.0 million dollars to 2.6 million annually the amount spent on street lighting by switching to LED bulbs — will have a “tremendous” impact on St. Lucia.

The government is moving to make its own buildings more energy efficient, and will take to Parliament legislation to provide home and land tax, income tax rebate for people who are retrofitting their homes with energy efficient devices or installing grid-tie solar PV.

“What that does is many-fold. First of all, it causes our economic sector to be much more competitive,” Fletcher says, adding that a large portion of spending in the tourism sector is on energy.

“When you now superimpose on that the work we are doing with renewables, that, hopefully, will cause a reduction in the price of electricity from what it is right now, which 38 US cents per hour, to something approaching 30 cents. Then the expenditure by our hotels, by our manufacturing sector, the expenditure by people who are interested in value-added in agriculture, that expenditure goes down and it makes those sectors more competitive,” Fletcher tells IPS.

“On the household side, any money that is not being spent on energy is money that can be spent on something else. And so our focus is not just on the commercial establishments but also to get our residential consumers to benefit from the reduction in the cost of electricity, but also by putting in energy saving measures in their homes and giving them concessions to do that, that they will realise significant savings where their energy expenditure is concerned.”

Fletcher is one of St. Lucia’s and CARICOM’s negotiator at the global climate change talks, where the nations of the worlds are slated to sign a binding deal for reducing global warming in Paris later this year.

He tells IPS that at the international climate change negotiations, St. Lucia has been saying to developed countries that they have to reduce their emissions of greenhouse gases to keep global warming to two degrees above pre-industrial levels, as proposed by experts.

“Now, it strengthens our case. It strengthens our moral argument if we can say that a country like St. Lucia that contributes … something like 0.00078 per cent of all green house gases, we recognise the importance of this being a global effort and we are still committing to reducing our carbon footprint by 30, 40, 50 per cent.

“Then we believe that the big emitters, like the United States, like the European countries, like China, like Russia, that they also should be doing more to reduce their greenhouse emissions. So, I think it strengthens our hand in the international negotiations where climate change is concerned,” Fletcher tells IPS.

Edited by Kitty Stapp

The writer can be contacted at Kentonxtchance@gmail.com

Follow him on Twitter @KentonXChance

The continuing decline in oil prices has already reduced purchasing power and impacted negatively on some of the world's currencies. Credit/Justin R/cc by 2.0

By Thalif Deen
UNITED NATIONS, Jan 2 2015 (IPS)

In a satirical piece titled ‘An Unserious Look at the Year Ahead’ in the Wall Street Journal last week, Hugo Rifkind predicts the price of a barrel of oil will fall so low that people across the world would start buying oil for the barrel – and throw the oil out.

The journalistic spoof about the oil market may be an improbable scenario, but in reality the sharp decline in prices has generated both good and bad news – mostly bad.If Middle Eastern sales flatten out or decrease, arms companies may fight harder for contracts in other parts of the world where military expenditure is still on the increase and less dependent on oil prices, such as in North, South East and South Asia.

In the United States, the fall in oil prices is being viewed as an unexpected – but welcome – stimulus to the country’s recession-struck economy.

As one U.S. newspaper headline read: ‘For (U.S. President Barack) Obama, Low Oil Prices Bring Hope’

The London Economist points out that a 40-dollar price cut would shift about 1.3 trillions dollars from oil producers to consumers.

But in the developing world, the current plunge is threatening to undermine oil-dependent economies in Africa, Asia, Latin American and the Middle East.

The continuing decline – from around 107 dollars per barrel last June to less than 70 dollars last month – has already reduced purchasing power and impacted negatively on some of the world’s currencies, including the ruble (Russia), real (Brazil), rupiah (Indonesia), bolivar (Venezuela), naira (Nigeria), peso (Chile), lira (Turkey) and ringgit (Malaysia).

But sooner or later the fall in oil prices is also likely to have a negative impact on both military spending and the thriving multi-billion-dollar arms market in the Middle East.

Perhaps for peace activists, this may be a positive sign in the global campaign for disarmament – mostly in conventional arms.

Arms buying by the six Gulf monarchies alone – Saudi Arabia, United Arab Emirates (UAE), Kuwait, Qatar, Oman and Bahrain – have been traditionally fueled by rising oil incomes: more incomes, more state-of-the art weapons.

The exceptions in the Middle East are Israel and Egypt, which depend heavily on U.S. military grants that are gratis and non-repayable.

Pieter Wezeman, a senior researcher at the Arms Transfers and Arms Production Programme, at the Stockholm International Peace Research Institute (SIPRI), told IPS lower oil revenues will undoubtedly put pressure on the military expenditure of Middle Eastern states, as in the past.

Saudi Arabia’s arms imports peaked in the 1990s, he said, but then fell rapidly, partly because of oil price-related lower government revenues.

“However, for 2013, we estimated Saudi Arabia will be the world’s fourth largest military spender [about 67 billion dollars] and the UAE the fifteenth largest [19 billion dollars],” said Wezeman, who closely tracks the Middle Eastern arms market.

The world’s three largest military spenders are the United States (640 billion dollars), China (188 billion) and Russia (88 billion), according to 2013 figures released by SIPRI.

Striking a cautionary note, Wezeman said it is, however, too early to say anything about this with certainty, as the arms procuring states in question tend to be highly secretive and undemocratic about military matters and arms procurement programmes and plans.

“They may very well decide to cut spending in other sectors instead, if lower oil prices force them to cut overall government spending,” he declared.

Unveiling its 2015 budget last week, Saudi Arabia said it was “rationalising” its expenditure, but did not specify any details.

According to estimates by the International Monetary Fund (IMF), Saudi Arabia’s total foreign exchange reserves amount to about 750 billion dollars.

Nicole Auger, a military analyst covering the Middle East and Africa at Forecast International, a leader in defence market intelligence and industry forecasting, told IPS a projected five-year defence spending (2015-2019) for the Middle East region shows the Compound Annual Growth Rate (CAGR) at approximately 3.48 percent.

This number is lower than the past five years’ CAGR (2010-2014), which was 8.45 percent.

“I do credit some of this decline to the anticipated fall in oil prices,” she said.

For Saudi Arabia, Qatar, Kuwait, and the UAE, this trend will only serve as a nuisance they can comfortably withstand for a few years – “so I do not expect any significant changes in their defence spending tendencies.”

These markets are huge, and they all spend lavishly on building up their defence capabilities, she said.

Saudi Arabia alone has the world’s fourth-largest military budget and will continue to dominate the Middle East arms market, with a defence budget nearly four times the size of the next closest Middle East military investor, she noted.

“I don’t see a major change in Iran and Iraq’s defence spending trends, even though they stand to be the most hurt by this.”

Auger said due to other regional and internal fractures, these two neighbours will have to maintain their defence spending levels as a cautionary measure.

Even though Iran is already suffering from international sanctions with its unresolved nuclear issue, it still feels it is being threatened, and therefore lower defence spending will only make it more vulnerable from its own perspective, she added.

“With Iraq, you may see them lean more heavily on its allies,” Auger said.

SIPRI’s Wezeman told IPS the importance of the Middle Eastern market for arms producing companies is the fact that sales of weapons to Saudi Arabia alone accounted for 20 percent of sales in 2013 for the third largest arms producer in the world, BAE systems.

And the second largest arms producer, Boeing, sees declining sales of combat aircraft to its main client the United States, and is increasingly dependent on exports, he added.

At the same time, Wezeman said, there are signs the military industry in the region is growing too, though it is still small compared to arms industries in the traditional arms producing countries.

If Middle Eastern sales will flatten out or decrease, he predicted, arms companies will have to fight harder for contracts in other parts of the world where military expenditure is still on the increase and less dependent on oil prices, such as in North, South East and South Asia.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

Soldiers patrol an oil field in Paloug, in South Sudan's Upper Nile state. Credit: Jared Ferrie/IPS

By Thalif Deen
UNITED NATIONS, Dec 23 2014 (IPS)

The sharp decline in world petroleum prices – hailed as a bonanza to millions of motorists in the United States – is threatening to undermine the fragile economies of several African countries dependent on oil for their sustained growth.

The most vulnerable in the world’s poorest continent include Nigeria, Angola, Equatorial Guinea, Gabon and Sudan – as well as developing nations such as Algeria, Libya and Egypt in North Africa."In the long run, governments in these oil-exporting countries should use oil revenues to support productive sectors, employment generation, and also build financial reserves when oil prices are high." -- Dr. Shenggen Fan of IFPRI

Dr. Kwame Akonor, associate professor of political science at Seton Hall University in New Jersey, who has written extensively on the politics and economics of the continent, told IPS recent trends and developments such as the outbreak of Ebola and the fall of global oil prices “shows how tepid and volatile African economies are.”

In 2012, for instance, Sierra Leone and Liberia (two of the hardest hit countries with Ebola) were cited by the World Bank as the fastest growing sub-Saharan African countries, he pointed out.

In a similar vein, countries such as Algeria, Equatorial Guinea and Gabon are considered top performing economies due to the large concentration of their oil and gas reserves.

“But the ramifications of any economic crisis will undoubtedly negatively impact the fortunes of these countries,” said Akonor, who is also director of the University’s Centre for African Studies and the African Development Institute, a New York-based think tank.

The world price for crude oil has declined from 107 dollars per barrel last June to less than 70 dollars last week.

There are multiple reasons for the decline, including an increase in oil production, specifically in the United States; a fall in the global demand for oil due to a slow down of the world economy; and a positive fallout from conservation efforts.

As the New York Times pointed out: “We simply don’t burn as much energy as we did a few years ago to achieve the same amount of mileage, heat or manufacturing production.”

There are also geopolitical reasons for the continued decline in oil prices because Saudi Arabia, one of the world’s largest producers, has refused to take any action to stop the fall.

Despite the crisis, the Saudi oil minister Ali Al-Naimi was quoted as saying, “Why should I cut production?”

This has led to the conspiracy theory it is working in collusion with the United States to undermine the oil-dependent economies of three major adversaries: Russia, Iran and Venezuela.

Besides Saudi Arabia, the fall in prices is also affecting Iraq, Kuwait, United Arab Emirates (UAE), Qatar and Oman.

But they are expected to overcome the crisis because of a collective estimated foreign exchange reserve amounting to over 1.5 trillion dollars.

The drop in oil prices, however, will have the most damaging effects on Africa which has been battling poverty, food shortages, HIV/AIDS, and more recently, the outbreak of Ebola.

The heaviest toll will be on Nigeria, the largest economy in Africa which depends on crude oil for about 80 percent of its revenues, according to the Wall Street Journal. The country’s currency, the naira, has declined about 15 percent since the beginning of the fall in oil prices.

Dr. Shenggen Fan, director general of the International Food Policy Research Institute (IFPRI), sees both a positive and negative side to the current oil crisis. He told IPS the recent decline in oil prices will help reduce food prices.

Since oil prices are highly co-related to food prices, high oil prices make agricultural production more expensive and thus cause food prices to increase, he added.

“Now that oil prices are on a downward trend, this is, by and large, good for global food security and nutrition,” he said.

Dr. Fan said poor producers and consumers in developing countries should be able to benefit from this – as long as their purchasing power increases.

However, he cautioned, oil exporting countries may lose government revenues from low oil prices.

Indeed, crude oil producing nations in Africa have felt the pinch of declining oil prices given the dependence of their economies on crude oil, he noted. In the short run, he said, poor people may suffer, if their governments reduce food subsidies.

“In the long run, governments in these oil-exporting countries should use oil revenues to support productive sectors, employment generation, and also build financial reserves when oil prices are high.”

When oil prices are low, these governments should use reserves to ensure that poor people are protected through social safety net programmes, he added.

Dr. Akonor told IPS as impressive as the current and long-term economic projections for Africa might seem, it does not change the precarious and fragile nature of the continent’s economic foundations.

“The high debt overhang and the heavy reliance on raw materials (such as oil) and minerals for exports, makes African economies susceptible to shock and systemic risks,” he noted.

Moreover, he said, the underlying human capital formation, especially amongst the burgeoning unemployed youth population, lacks the requisite skills that could lead to real sustainable growth and transformation.

“What is needed then is the effective implementation of development strategies and policies that would lead to long-term structural transformation and durable human development,” he argued.

One way to achieve this is through closer regional cooperation, given the small size of domestic markets and poor continental infrastructure. Transformative and human needs development must, amongst other things, address Africa’s poor infrastructure, said Dr. Akonor.

According to the African Development Bank, the road access rate in Africa is only 34 percent, compared with 50 percent in other developing regions. Only 30 percent of Africans have access to electricity, compared to 70-90 percent in other developing countries.

“What makes Africa’s development challenges vexing is that there has not been a shortage of autonomous development-related ideas between African leaders and interested publics,” Dr. Akonor said.

One can argue that Africa has debated and produced too many blueprints and programmes for over half a century without any tangible results or follow through, he said.

“Thus the major obstacle to durable economic performance in Africa has not been the ambitious nature of the development targets, but rather the absence of political will by African governments and the lack of consistency, coordination, and coherence at the sub regional, regional and even global levels to implement structural change,” Dr. Akonor declared.

“Transformational development will require that Africa add value to, and diversify, its export commodities. Building a solid industrial base and infrastructural capacity are also necessary prerequisites toward autonomous structural change.”

Dr. Fan told IPS that on the broader issue of the factors that influence food prices, it is important to realise the right price of food is not easy to determine.

What is important is that the prices of food (including the natural resources that are used for food production) fully reflect their economic, social, and environmental costs and benefits in order to send the right signals to all actors along the food supply chain.

“If this causes food prices to increase, social safety nets should be provided to protect poor people in the short term and also to help them move on to more productive activities in the long term,” Dr. Fan said.

In so doing, their food security and nutrition is not compromised, he declared.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

By Roberto Azevêdo
GENEVA, Jul 29 2014 (IPS)

In the 1960s, there were high hopes for the development of the newly-independent sub-Saharan African countries but these hopes were quickly dashed following a series of shocks which began in the mid-70s, with the first oil price spikes, followed by a severe decline in growth and increase in poverty in the 80s and early 90s. However, by the mid-1990s, economic growth had resumed in certain African countries. Economic reform, better macroeconomic management, donor resources and a sharp rise in commodity prices were having a positive effect.

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

In the 2000s, many African countries witnessed high economic growth performance and during that period some of the world’s fastest growing economies were in sub-Saharan Africa. Angola, Nigeria, Chad, Mozambique and Rwanda all recorded annual growth of over 7 percent.

In 2012 Africa’s exports and imports totalled 630 billion dollars and 610 billion dollars respectively, ­ a fourfold increase since the turn of the millennium. And the long term prospects for growth are good. The Economist Intelligence Unit has forecast average growth for the regional economy of around 5 percent yearly from 2013-16.

Despite all this, the continent still plays a marginal role in the global market, accounting for barely 3 percent of world trade. One significant reason – although, of course there are others – is that African economies are still narrowly based on the production and export of unprocessed agricultural products, minerals and crude oil.“There is little doubt that the regional [African] market offers good scope for African firms to diversify their production and achieve greater value addition”

Now, due to relatively low productivity and technology, these economies have low competitiveness in global markets – apart from crude extractive products. The low productivity of traditional agriculture and the informal activities continue to absorb more than 80 percent of the labour force. And growth remains highly vulnerable to external shocks.

This story of half a century of struggle, set-backs and progress shows two things:

One, the road to meaningful and inclusive development still seems long.

Two, we are in a better position than ever to make real, sustainable progress.

Many countries are striving to do more in turning their strength in commodities into strengths in other areas,­ using commodities as a means of spurring growth across various sectors. The United Nations Economic Commission for Africa’s 2013 Economic Report echoes this ­ calling for the continent’s commodities to be used to support industrialisation, jobs, growth and economic transformation.

In line with this, I think there are a number of essential steps to take:

– diversification of economic structure, namely of production and exports;

– enhancement of export competitiveness;

– technological upgrading;

– improvement of the productivity of all resources, including labour; and

– reduction of infrastructure gaps.

Only by delivering in these and other areas can policymakers ensure that growth enhances human well-being and contributes to inclusive development. But how can we take these steps?

Of course I should say that although African countries share some common features, no unique set of policies, including those on trade and industrial policy, could ever fit for all in a uniform way. Even among the least-developed countries (LDCs), some are already exporters of manufactured products, although often they rely on a single product  while others are more dependent on commodities. Nevertheless, I think it is clear that some preconditions of success are universal.

African regional integration is of course very high on the policy agenda. There is little doubt that the regional market offers good scope for African firms to diversify their production and achieve greater value addition. Already now, manufactures constitute as much as 40 percent of intra-African exports, compared with 13 percent of Africa’s exports to the rest of the world.

The Bali Package, which World Trade Organisation members agreed in December last year, will help to resolve some problems. Inclusive, sustainable development was at the heart of the whole Bali project ­ and our African members played a crucial role in making it a success. It brought some progress on agriculture. It delivered a package to support LDCs. It provided for a Monitoring Mechanism on special and differential treatment.

And, in addition, Bali delivered the Trade Facilitation Agreement and this is a direct answer to some of the problems of fragmentation. Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within Africa to unsustainable levels, creating a further barrier to intra-African trade.

This Agreement will help to address some of these bottlenecks. It will support regional integration, and therefore complement the African Union’s efforts to create a continental free trade area. And it will begin to remove some of the barriers which prevent full integration into global value chains. As such it will create an added impetus for industrialisation and inclusive sustainable development.

And it is worth noting here that the Trade Facilitation Agreement broke new ground for developing and least-developed countries in the way it will be implemented.

Another vital issue here is the importance of agricultural development in industrialisation, and the role of industrial collaboration through regional cooperation. The contribution of the agriculture sector is of utmost importance for the establishment of a sound industrial base. It can provide a surplus to invest in industrial capacity building, and supply agricultural raw materials as inputs to the production process, especially for today’s highly specialised food processing industry.

Moreover, it can also significantly contribute to industrialisation by providing an ample supply of food products. This is because food constitutes a large share of what wage earners in African countries spend their money on. Its availability at low prices contributes to increase the purchasing power of wages, and therefore raise the competitiveness of a country in international markets. (END/IPS COLUMNIST SERVICE)

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