Lynette Gitonga

A Look at Turkey's Trade Policy and FTA with Mauritius

noreply@blogger.com (Lynette Gitonga) — Fri, 24 Feb 2012 11:25:00 +0000

Turkey concluded an FTA with the first Sub Saharan African country, Mauritius, on September 9th 2011 and is expected to initiate negotiations with other EPA and EC FTA signatories. This is because the customs union between Turkey and the EU, which entered into force on 1 January 1996, has been the main factor shaping Turkey's foreign trade policy. In addition, the EU opened accession negotiations with Turkey in October 2005 and guidance on reform priorities is provided through the Accession Partnership, adopted in February 2008.

In the EU-Turkey customs union, the EU unilaterally eliminated all customs duties and equivalent measures for industrial products and processed agricultural products when the trade-related provisions of the Interim Agreement of the Protocol entered into force in September 1971, whereas Turkey as a developing country was accorded a transition period of 22 years.

The EC-Turkey customs union also provides for a common external tariff for the products covered, and foresees that Turkey will align its trade-related legislation with the EU acquis in several areas essential for market access, e.g. with respect to product standards. The customs union covers all industrial products as well as the industrial component of processed agricultural goods, TRIPS, and competition policy, but does not extend to agricultural commodities, services, or government procurement. The EU however offers Turkey a preferential regime on imports of certain agricultural products. Negotiations on services and government procurement were launched in 2000, but are now part of Turkey's accession process.

The customs union also provides provision for:

free movement (elimination of customs duties and quantitative restrictions)
alignment of Turkey on the EC common external tariff, including preferential arrangements (even GSP), and harmonisation of commercial policy measures;
approximation of customs law, and
approximation of other laws (intellectual property, competition, taxation, etc.)
the adoption by Turkey of measures equivalent to the EU's common commercial policy

The European Union remains Turkey's most important trading partner and investor. For instance, the EU accounted for nearly 70% of total FDI inflows into Turkey during 2005-10. Nearly 40% of its imports come from the EU, and just over 50% of exports go to the EU. Machinery and transport equipment dominate EU imports from Turkey followed by manufactured articles which account for 24.3%. Main EU exports to Turkey are machinery and transport material (45.1%), chemical products (17.1%) and manufactured goods (15.1%).Globally, Turkey ranks 7th in the EU's top import list and 5th as an export market. However, the dominance of the EU in Turkey's foreign trade has declined markedly over the last five years, reflecting a notable shift in Turkish exports towards growth markets in its neighbourhood, in North Africa, certain CIS countries, and in Asia.

Other main Turkish export markets in 2010 were Iraq (5.3%), Russia (4.1 %), USA (3.4%), United Arab Emirates (2.9%) and Iran (2.7%). Imports into Turkey came from other key markets include: Russia (11.7%), China (9.4%), USA (6.7%), Iran (4.2%) and South Korea (2.6%).

Turkey currently has about 17 FTAs in force which include one with the EFTA countries, Israel, Macedonia (FYR), Croatia, Bosnia-Herzegovina, Palestinian Authority, Tunisia, Morocco Syria, Egypt, Albania, Montenegro, Serbia, Georgia, Chile, Jordan, Lebanon and Mauritius.

The Mauritius-Turkey FTA provides enhanced duty free access on most industrial products. All Mauritian industrial products will enter Turkey duty free with the exception of some 70 lines related to textiles which will be phased on four years. Mauritius in return will offer duty free access to more than 80% of its tariff lines to Turkish products. In any case Mauritius is a duty free island with over 80% of applied tariffs at zero.

Why the exclusion of agricultural products? Turkey, even though a member of the G-33 , ranks amongst the largest agricultural producers in the world and the main crop is wheat of which the country is over 90% self-sufficient. With corn, Turkey is about 80% self-sufficient and is a net-exporter of barley. Other major crops include fruit and vegetables, nuts, tobacco, cotton, and sugar. Turkey is also one of the major milk producers in the world, predominantly for domestic consumption of cheese and yoghurt. While Turkey has specialized feed lots and dairy farms, and large-scale commercial poultry farms, livestock production is mainly extensive and small-scale.

Useful to note that Turkish agricultural policy was adopted with a view to aligning it more closely with the EU Common Agricultural Policy. Turkey's main policy objectives are food security and food safety, and raising the self-sufficiency level for selected net-imported products; improving productivity and competitiveness; ensuring sustainable farm incomes; rural development; and improving institutional capacity.

For comparison, by the end of 2007, the 6 ESA EPA States: Comoros, Madagascar, Mauritius, Seychelles, Zambia and Zimbabwe agreed an interim EPA with the EU. Mauritius in that agreement submitted an individual schedule which is annexed to the interim EPA and liberalises 96% of EU imports into Mauritius compared to 80% with Turkey, possibly due to the inclusion of some agricultural products.

What appears unfortunate in the Mauritius-Turkey FTA is that Turkey seems to have offered market access predominately in industrial goods, where Turkey is competitive. However few SSA African countries are neither productive nor competitive in industrial manufacturing. With Turkey being an emerging industrial exporter, the loss of revenue on the import side could be an area of concern. In agriculture, Turkey provides subsidized support which is equivalent to the EU Common Agricultural Policy.

The EU Single Market Services Directive

noreply@blogger.com (Lynette Gitonga) — Tue, 21 Feb 2012 17:23:00 +0000

The Directive on Services in the Internal Market (the Services Directive 2006/123/EC) was adopted in December 2006. The Directive liberalises the internal services market in that it requires Member States to abolish discriminatory requirements, such as nationality or residence requirements, and particularly restrictive requirements, such as “economic needs” tests (requiring businesses to prove to the authorities that there is a demand for their services). It also requires the review of other burdensome requirements which may not always be justified (such as territorial restrictions or minimum number of employees).

The EU member States were provided a three-year transitional period to transpose the Directive into national legislation. However, several member States missed the end-2009 deadline, and work to implement the Directive continued throughout 2010. The Directive requires the Member States to simplify procedures and formalities that service providers need to comply with. In particular, it requires Member States to remove unjustified and disproportionate burdens and to substantially facilitate:

the establishment of a business, i.e. cases in which a natural or legal person wants to set up a permanent establishment in a Member State, and
the cross-border provision of services, i.e. cases in which a business wants to supply services across borders in another Member State, without setting up an establishment there.

During 2010, the Commission was monitoring the implementation by the member States, of both the new legal frameworks adopted in order to implement the Services Directive as well as their efforts to establish operational "Points of Single Contact" (PSCs), notably the online portals providing businesses with information about the requirements and procedures to be complied with, and the "Internal Market Information Systems" facilitating administrative cooperation between the authorities of the member States. The PSCs are certainly the most visible benefit of the Services Directive for businesses. They are meant to become fully fledged e-government portals allowing future entrepreneurs and existing businesses to easily obtain online all relevant information relating to their activities (applicable regulations, procedures to be completed, deadlines, etc.) with the ability to apply online and across borders.

Although the vast majority of the member States have chosen to implement the general principles and obligations of the Directive through a single act, implementation of the general principles has been carried out through several acts in France and Germany. In addition, all member States have had to amend or abrogate existing legislation to ensure conformity with the provisions of the Directive.

The Services Directive does not harmonize national legislation applicable to the services sector, but obliges member States to screen their authorization schemes to ensure that they are maintained only if non-discriminatory, justified by an overriding reason relating to public interest, and proportionate.

The Services Directive applies to the provision of a wide range of services – to private individuals and businesses – barring a few specific exceptions. For example, it covers:

distributive trades (including retail and wholesale of goods and services)

the activities of most regulated professions (such as legal and tax advisers, architects, engineers, accountants, surveyors)

construction services and crafts

business-related services (such as office maintenance, management consultancy, event organisation, debt recovery, advertising and recruitment services)

tourism services (e.g. travel agents)

leisure services (e.g. sports centres and amusement parks)

installation and maintenance of equipment

information society services (e.g. publishing – print and web, news agencies, computer programming)

accommodation and food services (hotels, restaurants and caterers)

training and education services

rentals and leasing services (including car rental)

real estate services

household support services (e.g. cleaning, gardening and private nannies).

The Services Directive does not apply to the following services, which are explicitly excluded:

financial services

electronic communications services with respect to matters covered by other community instruments

transport services falling into Title V of the EC Treaty

healthcare services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession

temporary work agencies' services

private security services

audiovisual services

gambling

certain social services provided by the State, by providers mandated by the State or by charities recognised as such by the State

services provided by notaries and bailiffs (appointed by an official act of government).

The Commission has not drawn up concrete plans to cover the other excluded services. Services activities are in any event always subject to the EC Treaty provisions, notably the fundamental freedoms of establishment (Article 43) and free movement of services (Article 49). The Services Directive applies only to EU (EEA) citizens and legal entities established in the EU (EEA), and does not oblige member States to consider changes applicable to non-EU services suppliers.

COMESA-EAC and SADC Launch Climate Change Intitiative

noreply@blogger.com (Lynette Gitonga) — Wed, 14 Dec 2011 07:50:00 +0000

The East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC) have launched a joint five-year Programme on Climate Change Adaptation and Mitigation. The focus of the Programme is increasing investments in climate resilient and carbon efficient agriculture (climate-smart agriculture) and its linkages to forestry, land use and energy practices by 2016. The programme has received $20 million funding from the Royal Government of Norway, the European Union Commission and UK’s Department of International Development (DfID), signifying an exemplary partnership between Africa and Europe on climate change.

The three RECs comprising the Tripartite will synergize on their respective comparative advantages that include: main-streaming climate change in national and regional policies and strategies; climate resilient and climate smart agriculture; vulnerability assessment and disaster risk reduction approaches; and climate change policy negotiations to provide African solutions to climate change.

EAC’s key achievements in the area of climate change over the last few years include: approval of the EAC Climate Change Policy and issuance a Declaration on Food Security and Climate Change by the EAC Summit; the establishment of the EAC Climate Change Fund and Climate Change Coordination Unit at the EAC Secretariat; as well as the development of a Regional Climate Change Position as input to the African Common Negotiating Position on Climate Change.

See full article here and previous articles on climate change here.

Legal constraints on the EU’s ability to withdraw EPA preferences

noreply@blogger.com (Lynette Gitonga) — Wed, 30 Nov 2011 20:29:00 +0000

Dr Lorand Bartels provides useful and timely advice on the legal constraints behind the EU's ability to withdraw EPA preferences from ACP States and he identifies various problems with the Commission’s proposal. These include steps taken towards ratification i.e. progress to date and the mechanism of provisional application.

He concludes by stating that Regulation 1528/2007 can only be terminated in accordance with Article 25(2) of the Vienna Convention. This provision lists three ways in which this can be done: by agreement between the parties; according to the treaty itself; and when the party seeking to terminate notifies the other party or parties that it does not intend to become a party to the treaty. Where these conditions are not satisfied, the provisions of the treaty being provisionally applied are treated as applicable for that party.

While the EU can still remove ACP countries from the list of beneficiaries, if it wishes to do this, it must notify them of its intention not to become a party to the respective agreements. What it cannot do is remove beneficiaries from Annex I of the Regulation as the Commission is proposing to do - not, at least, without violating Article 25(2) of the Vienna Convention on the Law of Treaties, and thereby also EU law itself.

Assess full article here and see previous EPA posts here.

China and EAC Sign Trade and Investment Framework Agreement

noreply@blogger.com (Lynette Gitonga) — Wed, 23 Nov 2011 12:30:00 +0000

The Framework Agreement focuses on the promotion of commodity trade, exchange of visits by businesspeople from EAC and China, co-operation in investment, infrastructure development, human resource development and training. The two sides also created a Joint Committee on Economy, Trade, Investment and Technical Cooperation (JCET) as the implementation framework for the Agreement.

This is a different type agreement from the EPAs. It focuses on market enabling assistance in areas such as infrastructure development, skills development and private sector engagement. In fact, China has indicated she will provide funding for feasibility studies on roads and infrastructure. The focus on commodity trade also signals willingness to expand agricultural production and processing of agricultural commodities and thereby enhancement of the value chain.

See full story here.

World Bank Unveils Portal On Diaspora Remittances to Africa

noreply@blogger.com (Lynette Gitonga) — Wed, 23 Nov 2011 12:02:00 +0000

This transparency is important.

Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money from selected countries worldwide to a number of African countries, as well as within the African continent. The objective of the database is to increase transparency in the market and provide migrants with complete and reliable information on all the components of the transaction. Send Money Africa allows the users to compare the costs applied by several providers to send and receive money from 15 major sending countries to 27 African receiving countries, for a total of 50 "country corridors".

See country corridors here.

Africa's Growing Firms Sidestep Jo'burg for London

noreply@blogger.com (Lynette Gitonga) — Mon, 31 Oct 2011 20:37:00 +0000

When Zambian farming firm Zambeef Products began considering a dual listing of its stock, it looked at both the Johannesburg exchange and London's AIM market.

Although Johannesburg was closer to home for Lusaka-based Zambeef, the London Stock Exchange's higher profile won in the end, and in June the company became the first Zambian firm to list on the AIM, a market for smaller companies.

"It was a tough decision," said Zambeef executive director Yusuf Koya, taken after plenty of internal debate.

"A key factor in the decision process was London's reputation as the world's financial centre, which allows us to access a potentially wider range of investors and liquidity."

As African companies increasingly look to do dual listings, many, like Zambeef, opt for London over Johannesburg, challenging the Johannesburg Stock Exchange's aim to become the gateway to Africa's capital markets.

A total of 104 African companies are listed on the London exchange, with the majority on AIM. The combined market value of African companies listed in London is now bigger than every African exchange except Johannesburg.

Just under $2.1 billion was raised by African companies on the London bourse in 19 transactions in 2010, representing about 90 percent of all equity capital raised by Africa-focused companies in 2010, said Ibukun Adebayo, the LSE's head of equity primary markets

Dual listings are critical for companies that outgrow their home exchanges, where thin liquidity keeps large investors out.

Big bourses such as London and Johannesburg also boast tougher disclosure requirements, reassuring investors concerned about Africa's corporate governance.

London-based investors tend to have a bigger appetite for emerging market assets than their South African counterparts, bankers say.

"South African investors don't understand Africa risk in the same way UK investors do," said one pan-Africa private equity banker.

London-listed companies may also be easier to sell, especially to investors in Asia or North America, who are not as familiar with the Johannesburg exchange.

"London has built a status for itself. When you're going to market a company listed in London versus a company listed on the JSE, people understand London, despite whatever jurisdiction you're going to," said one veteran capital markets banker based in Johannesburg.

Smaller companies, especially those with a niche focus, are more likely to have more industry peers on the AIM, making valuations more accurate, the banker said.

From Business Daily. Continue reading here.

EAC Finalizes Industrialisation Policy and Strategy

noreply@blogger.com (Lynette Gitonga) — Wed, 19 Oct 2011 12:45:00 +0000

ARUSHA, TANZANIA-

East African Community (EAC) Secretariat is in the final stages of completing a regional industrialization policy which is to among others promote regional industries, an official of the Secretariat has said.

"EAC is in the process of formulating its Industrialization policy and strategy, which is expected to provide a detailed regional framework for cooperation in the field of Industrial and small and medium enterprises (SME) development," said the EAC Head of Corporate Communications and Public Affairs Richard Owora.

He revealed that the regional industries whose economic benefits extend beyond national boundaries that have been identified include: pharmaceutical, automotive, agricultural machinery and tools, basic metal, petrochemicals, Information Communication Technology (ICT) and computer and SME development among others.

"That is why the secretariat with support from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) held a five-day experts meeting to review the draft EAC industrialization policy and strategy in Uganda. He said the discussions revolved around formulating policy inputs and recommendations from the stakeholders for the finalization of the policy and strategy, identification of priority regional industries to be promoted on comparative advantages, identification of policy interventions projects and programmes to be undertaken at national and regional levels and to update the draft final documents.

"The goal of cooperation in industrial development is to enable partner states to collectively and individually attain accelerated, harmonious, and balanced development, as envisioned in the EAC Treaty," he said adding that the draft policy and strategy has identified several industries, which will be promoted through collective community efforts, so as to realize economies of scale and attain international competitiveness.

Uganda's Director of Trade, Industry and Co-operative in the Ministry of Trade, Industry and Co-operative, Mr Samuel Ssenkungu noted that industrialization and technological diffusion have both potential to make a sustainable contribution to economic growth and job creation in the region.

EAC to review Rules of Origin

noreply@blogger.com (Lynette Gitonga) — Wed, 12 Oct 2011 20:48:00 +0000

Business Daily

The East African Community is set to review border passage rules for goods, paving the way for more Kenyan exports to access the regional market. The bloc’s custom and trade division has invited consultants to align the rules of origin with changes in manufacturing to facilitate intra-regional trade in the region.

“We expect the reviewed rules of origin to capture as many changes including transport costs that have grown in importance for firms,” Peter Kiguta, EAC’s director-general in charge of trade and custom said in a telephone interview.

Mr Kiguta also said the review would prepare the region for an eventual merger with Comesa and SADC. The rules will also be phased out once a single EAC revenue collector is set up.

Trade Mark East Africa has floated the tender asking consultants to simplify the rules of origin so that they can be implemented easily.

The present rules of origin only allow goods produced wholly from local inputs to cross national borders without attracting custom taxes.

Goods produced from imported raw materials also enjoy duty-free treatment where the exporter can prove that at least 35 per cent of the ex-factory value was added within the region.

The proof is usually that the local transformation process has moved the product to a tariff category different from that of imported parts or inputs.

The application of this rule has been controversial, with traders claiming it is selectively applied by customs officials to bar Kenyan products from entering Tanzania, Uganda, Rwanda and Burundi.

The partners phased out duties on Kenyan goods that meet these rules from January after the end of the transition period. Some of the vehicles from the Nairobi-based General Motors East Africa and CMC Motors are among products affected by the rules of origin.

While assemblers stake their claim to the regional market on the number of jobs and operations involved, border officials have maintained that the process entails very little transformation on the completely knocked down vehicle parts.

The beauty products sold by Inter-consumer Products Ltd; Nido, Milk and Nescafe produced by Nestle Kenya; television sets manufactured by Aucma Digital Technology Africa; and lubricants manufactured by Kenol/Kobil have also encountered similar restrictions at border posts.

“Our market share has grown significantly in the region since the EAC’s verification mission cleared our products last year with Uganda becoming our largest market,” Charles Njogu, KenolKobil’s spokesman, said on Tuesday.

Kenya Revenue Authority officials said the rules of origin are now outdated because of rapid changes that have taken place since they were conceived more than six years ago.

The officials said they are encountering cases where genuine goods are being locked out simply because the rules are blind to their unique circumstances. The use of technology and other cost-efficient production techniques has rendered the 35 per cent value addition threshold irrelevant, KRA said, adding that a change in tariff heading alone would be more objective.

“Use of total cost to determine local value addition is not objective,” an official who could not be named under KRA protocols said yesterday. “An operation that contributed 35 per cent to total cost six years ago may have fallen to 20 per cent due to cost cutting. The RoO does not factor in investments that contribute to efficiency

Lately, Kenyan edible oil firms such as Kapa Oil and Bidco Oil have been fighting to defend their markets from custom officials who maintain the refining of imported crude palm oils does not meet the value addition threshold.

The firms import crude palm mainly from Asia to manufacture products such as cooking fats and soaps which they export to EAC and Comesa countries.

“In this case, refining process is the huge but hidden investment that must be recognised for the rules of origin to make sense to exporters,” said the KRA official.

EPA Negotiations: The honeymoon is over…

noreply@blogger.com (Lynette Gitonga) — Tue, 04 Oct 2011 14:11:00 +0000

Saw this coming. For a detailed report see here.

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The European Commission (EC) finally announced today that countries that have concluded an Economic Partnership Agreement (EPA) but not taken the necessary steps to ratify and implement it would no longer benefit from the EPA market access to Europe as from 1^st January 2014.

The EC Market Access Regulation (MAR) 1528 of 1^st January 2008 provides duty free quota free market access for African Caribbean and Pacific countries that have concluded an EPA. The Regulation requires countries to sign, ratify and implement the Agreement within a “reasonable period of time”. At it currently stands, the MAR is a temporary, unilateral instrument of the EU to ensure that, pending the implementation of the agreement by ACP countries, there would be no trade disruption.

A quick glance at it reveals the following facts: Only 18 island countries from the 36 ACP countries that had initialled or signed an arrangement have consumed the marriage. The other remaining countries are yet to complete the nuptial contract, with the risk of seeing their marriage cancelled…

The announcement of this proposal is no surprise: Trade Commissioner De Grucht and other representatives of the European Commission have constantly been warning that this situation was not sustainable and would therefore have to end at some point in time.

The proposal will come into effect on 1^st January 2014, after approval by the Council. It is worth mentioning here that MAR 1528 in 2008, was adopted prior to the Lisbon Treaty, and therefore the Parliament will not have to give its assent to it. The timing is also not surprising: 1^st January 2014 is also the time when the new Generalised System of Preferences (GSP) Regulation should come into effect. It is also the date when the countries that have signed and ratified an EPA will have to start implementing their respective trade liberalisation commitments (remember some countries had a 5 year moratorium before starting liberalisation).

The message is therefore clear: if countries want to continue to benefit from EPA market access, either they have to sign and start implementing their existing EPA or conclude a new regional EPA. For others, either they will fall under one of the schemes of the new GSP (i.e. Everything but Arms, Standard GSP or GSP Plus) or they will have no preferences (as might be the case for Botswana and Namibia).

What does this imply?

This coming year will be a political litmus test for the relationship between the EU and its African and Pacific partners. If from a legal and a “coherence” perspective the Proposal of the EU is well understood, there are also good reasons why, four years down the road, since the MAR in 2008, nothing has happened. First, some compromise on many issues, including on the accompanying development measures, are yet to be agreed. Moreover, most countries are also engaged in building their regional integration agenda: many are either consolidating their existing customs union or setting it up. And Europe is well placed to know that regional integration takes time. So while a deadline by 1^st January 2014 might seem a reasonable time for the EU, it is in fact very short for the proper sequencing of regional agenda with trade negotiations with third countries. Finally, some might have simply lost interest in the process.

So, like in 2007, expect some tensions in the coming months: some countries might be pressured to sign, ratify and implement the EPA that might not fulfil their ambitions and interests in terms of content, timing and geographical configuration by fear of market disruption, in particular if they risk loosing preferential access to the EU. Others might simply walk out. If no common position can be found at the regional level, the EPAs could seriously disrupt any regional integration effort.

But 2014 is not 2007. The world has changed and this time the response might be different. The financial crisis invited itself to the dance, Africa has gained a lot more confidence in its economic prospects and the increasing importance of “emerging” partners has brought in a new geopolitical dynamism, de facto reducing the leverage of the EU.

Finally, it takes two to tango. African and Pacific countries now have to reveal their strategies, interests and preferences regarding their relationship with the EU. It is a question of political will in many cases and for those interested in an EPA, it will require some effort to reach a compromise. At the same time, while one might understand the European logic to put an end to an instrument that has remained “temporary” for too long and is not compatible with rules of the WTO, there are still some “contentious issues” that remain unresolved. The EU has also to reveal its cards on how far it would be willing to accommodate some genuine concerns that are blocking the negotiations. Setting a deadline is therefore not sufficient, the EU should come up with concrete proposals on how to move the negotiations forward.

Just putting a deadline could open the way for a new impetus to the current negotiations towards the conclusion of regional EPAs. But it could well turn out to be a guillotine if no flexibility is provided to advance the negotiations.

By San Bilal and Isabelle Ramdoo.

BRICS- SA's Role

noreply@blogger.com (Lynette Gitonga) — Mon, 12 Sep 2011 12:20:00 +0000

Interesting analysis below from the business day. Should note that SA's BRICS membership also adds another dimension to the tripartite FTA consisting of COMESA-EAC-SADC Member States.

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There is wide consensus that SA’s place in the emerging-market bloc that groups Brazil, Russia, India and China together, is only justified by SA’s strategic importance on the continent.

That means the country needs to tread a careful path between touting its own interests and facilitating links to the rest of Africa.

"It would be in SA’s interest to see this as a bargaining opportunity for the continent rather than just being expedient," said Standard Bank ’s group chief economist, Goolam Ballim. "Otherwise this could be harmful in the longer term for inter- African relationships."

It is a delicate task as SA does not have a mandate at this point to speak for any other African country. Jim O’Neill, the banker from Goldman Sachs who invented the acronym for the first four Bric countries, has said that Nigeria is in a better position to join the grouping.

SA’s economy is only a quarter the size of Russia’s, the next-smallest Brics member, and its share of world trade has been stagnant at 0,5% over the past decade. Its pace of growth also lags well behind the bloc’s other members.

But SA has a lot to offer the group, which analysts say could evolve into a political force rivalling the Group of Seven developed nations, campaigning for the interests of emerging economies. SA has one of the strongest financial sectors in the world, and receives about 95% of Africa’s portfolio inflows — foreign buying of local shares and bonds.

It could provide capital for companies looking to expand into the continent and is rated as the easiest place to open a business among all the other BRICS countries.

That would make it the logical choice for firms to establish their headquarters in SA.

The country is already the services hub for the continent and has significant corporate clout in the global arena.

Where it falls short is on transport infrastructure, both within the country and linked to its African neighbours.

Nonetheless, SA’s place on the continent is seen as key to its debut in the Brics club this week at the meeting at a Chinese resort.

"We are not individually important enough but if we can fill the role of an entry point to Africa, it will be an enormous opportunity," says Absa Capital economist Jeff Gable.

Sub-Saharan Africa has become the second-fastest growing region in the world after Asia and has been more resilient to the global financial crisis then Asia, Latin America and Eastern Europe. It offers an untapped market of hundreds of millions of people.

Standard Chartered’s regional research head for Africa, Razia Khan, thinks that the summit is unlikely to come up with concrete measures that will immediately affect the Brics economies.

But some analysts are expecting preferential trade agreements and developmental finance deals, given the participation of state-owned financial institutions.

Iraj Abedian, chief economist for Pan African Capital Holdings, hopes that the Brics summit will establish a "credible institution" to underpin its political clout. If that does not happen, it will remain a political multilateral rather than an economic leadership forum, he says.

isam@bdfm.co.za

Tripartite FTA COMESA-EAC-SADC

noreply@blogger.com (Lynette Gitonga) — Fri, 09 Sep 2011 06:37:00 +0000

The Second Tripartite Summit of Heads of State and Government (COMESA-EAC-SADC) took place on 12 June, 2011, in Johannesburg, South Africa. A major achievement of the summit includes the official launch of negotiations on the Tripartite Free Trade Area (FTA). Agreement was reached on the negotiating principles, processes, scope and institutional framework. A roadmap and timelines for establishing the FTA were also agreed.

Negotiations will be open to all the 26 countries of the COMESA-EAC-SADC Tripartite. It was agreed that the first phase of negotiations will address tariff liberalisation, rules of origin, customs cooperation and customs related matters, non-tariff barriers, sanitary and phytosanitary measures, technical barriers to tade and dispute settlement. The second phase will focus on negotiation trade in services and trade related issues, including intellectual property rights competition policy and trade development and competitiveness, . Facilitating movement of business persons within the region will be negotiated in parallel with the first phase as a separate track..

A timeline of 36 months has been set for completion of negotiations for the first phase and the movement of business person which will run concurrently. No timeframe has, however, been indicted for the second and final phase of FTA negotiations. .

Once in place, the Tripartite FTA will establish a larger market for Eastern and Southern Africa - leading to improved trade performance and competitiveness for the region.

Resource materials can be accessed here.

Kenya: Safaricom’s M-Pesa goes global with Western Union

noreply@blogger.com (Lynette Gitonga) — Thu, 11 Aug 2011 12:49:00 +0000

Incredible!

Safaricom, Kenya’s biggest mobile operator, has announced a deal with Western Union, the international money transfer company, to enable its M-Pesa mobile money service subscribers to receive direct cash transfers from Western Union agents worldwide.

“Consumers can now send money directly to the mobile ‘wallets’ of Safaricom M-PESA subscribers in Kenya from 45 countries and territories,” explains Karen Jordaan, East and Southern Africa Director at Western Union.

The service taps into Africa’s huge remittances flows, which the World Bank estimates to have totalled $40bn in 2010.

See full piece here and related posts here.

Ghana Reaches World Bank Middle Income Status

noreply@blogger.com (Lynette Gitonga) — Wed, 10 Aug 2011 11:15:00 +0000

Interesting...

On July 1, 2011 Ghana moved from low-income to lower middle-income status, according to World Bank country classifications.

Projections from the Bank’s Global Economic Prospects position Ghana as the fastest growing economy in Sub-Saharan Africa for 2011, with a forecast GDP growth of 13.4 percent. Authorities are now anxious to see that the oil windfall has a positive, lasting impact on the lives of all Ghanaians. In particular, Ghana hopes to steer clear of the so-called “Dutch disease”—the unique paradox where resource-rich countries grow too heavily dependent on oil at the expense of other productive sectors.

See full article here.

Kenya Launches Government Data Portal

noreply@blogger.com (Lynette Gitonga) — Wed, 10 Aug 2011 11:05:00 +0000

On transparency...

Kenya is the first developing country to have an open government data portal. This brings into focus the supply and demands sides of government information that other countries may take for granted.

The Kenya government data portal makes public data which includes national census, government expenditure, parliamentary proceedings, education, health, poverty, water, sanitation, energy and public services.

The Year in Trade 2010

noreply@blogger.com (Lynette Gitonga) — Fri, 29 Jul 2011 08:57:00 +0000

An outstanding resource for anyone working in or covering the field of international trade. The USITC’s Year in Trade 2010 is one of the US government’s most comprehensive reports on U.S. trade-related activities, covering major multilateral, regional, and bilateral developments.

The publication reviews U.S. international trade laws and actions under these laws, activities of the World Trade Organization (WTO), U.S. free trade agreements and negotiations, and U.S. bilateral trade relations with major trading partners. The Year in Trade 2010 also includes complete listings of antidumping, countervailing duty, safeguards, intellectual property rights infringement, and section 301 cases undertaken by the U.S. government in 2009.

Innovation for Growth in Africa

noreply@blogger.com (Lynette Gitonga) — Tue, 05 Apr 2011 13:28:00 +0000

...there are a number of areas where Africa must quickly focus its energy to improve its productivity and accelerate growth; agriculture, health, information technology and the arts.

Access the full speech by Dr. Ngozi Okonjo-Iweala, Managing Director, World Bank here

BRICS’ to Discuss Economic Coordination

noreply@blogger.com (Lynette Gitonga) — Mon, 04 Apr 2011 14:38:00 +0000

and some politics as well....

Leaders from five of the world’s top emerging economies will discuss a coordinated stance on economic issues such as commodity price fluctuation (however, the yuan’s exchange rate is off the agenda).

The mid-April ‘BRICS’ summit will gather leaders from China, Russia, India, Brazil and South Africa in the southern Chinese beach resort of Sanya. The summit will give the world’s big rising economies a venue to coordinate views on global financial reforms, commodity prices and other shared concerns since the BRICS countries have similar concerns on important questions like the global economy, international finance and development, reform of the international currency system, commodity price fluctuations, climate change and sustainable development.

See full report here.

Lamy Warns on WTO DDA Negotiations

noreply@blogger.com (Lynette Gitonga) — Mon, 04 Apr 2011 14:26:00 +0000

At a meeting in Kenya last week, Mr Pascal Lamy said the risk of failure of the talks — commonly referred to as Doha Development Agenda (DDA) after the Qatari city that first hosted them — is higher today than it was a few years ago. 'Should the talks fail, this could lock exports from poor countries out of major world markets'. See full report here.

Are local think tanks the secret weapon in Africa’s development armoury?

noreply@blogger.com (Lynette Gitonga) — Sun, 20 Mar 2011 14:51:00 +0000

I would agree- that by devising innovative solutions built on local research and local thinking, African think tanks can change the way development policy is made in our continent. Interesting piece

Global Preferential Trade Agreements Database

noreply@blogger.com (Lynette Gitonga) — Sun, 20 Mar 2011 14:26:00 +0000

The World Bank has recently launched the Global Preferential Trade Agreements Database, (GPTAD) which includes trade agreements that have been notified to the World Trade Organization (WTO) and those that have not been notified to the WTO. The database contains about 330 agreements which are indexed using a classification consistent with WTO criteria.

The WTO houses a similar database on RTAs. The WTO Regional Trade Agreements Information System includes agreements that have either been notified to the WTO or of which an early announcement has been made at the WTO. This database contains all the relevant documentation received by the WTO, following notification by a WTO member that an RTA has been established.

great tools for policy makers.

Manufacturing share of African GDP falling

noreply@blogger.com (Lynette Gitonga) — Thu, 10 Mar 2011 05:31:00 +0000

Interesting piece. In fact, Africa's agricultural and manufacturing GDP is falling. These realities should also be considered in light of the long standing WTO negotiations on agriculture and non agricultural products.

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Africa is uncompetitive, insufficiently export-driven, and situated too far from the world's main markets, argues economist Tony Hawkins.

"Africa has not been industrializing; it has de-industrialised. Since the 1990s, the GDP share of the continent's manufacturing sector has declined and now accounts for about 10% of the continent's GDP," said Tony Hawkins, economist and professor at the graduate school of management at the University of Zimbabwe.

"Over 60% of the industrial output from the whole of sub-Saharan Africa is generated in one country - SA."

Hawkins was speaking during the fifth Africa Economic Forum, taking place in Cape Town this week, which attracted economists, policy makers and business leaders from around the continent.

"Asia's manufacturing industry, on the other hand, is growing fast. One of the reasons is that the industry in this part of the world is export-driven. In Asia, manufacturing accounts for 70% of the continent's total annual exports. In Africa, this is 20%," he said.

One of the reasons why Africa would not able to compete with China lay in the market it produced for. "Africa is manufacturing goods for their own, local markets," he added.

"It is a small and poor market, with a low demand for high-tech products and a high demand for cheap goods. The problem is that the market for cheap goods is growing much slower than the high-tech markets the Asian manufacturing industries are producing for," Hawkins said.

"Let's not forget that Asia also produces cheap products for the export market and these are much more inexpensive compared with the goods made in Africa. They are often of a better quality. This hampers Africa's competitiveness."

Another major disadvantage was Africa's geographical location, Hawkins noted. "Many African countries, especially in sub-Saharan Africa, are situated far away from the world's major markets such as Europe, Asia and Latin America," he explained. "Exporting goods to these parts of the world requires high transport costs.

"Asia in this respect has taught us that having a competitive advantage globally no longer depends on natural resources and cheap labour," Hawkins continued. "It is about knowledge, strategic locations, and skills - among other things."

The situation in Africa could change for the better, he noted: "But only if African governments invest in their manufacturing industries and make them more competitive while upgrading the continent's export structures to overseas markets."

Credits: Miriam Mannak/Business Live

Kenya To Establish the Nairobi International Financial Centre

noreply@blogger.com (Lynette Gitonga) — Thu, 03 Mar 2011 11:18:00 +0000

Kenya hopes to position itself as a financial services hub similar to other financial hubs in the world e.g. London, New York, Dublin, Mauritius and Johannesburg.

Towards this end, finance minister Hon. Uhuru Kenyatta has launched a committee that will guide the establishment of the Nairobi International Financial Centre (NIFC), whose key task will be integrate the domestic financial sector to others in the region and globally. The committee will come up with proposals on the preferred type, financial implications, funding options and an implementation plan for the centre.

Meanwhile, in the regional context the World Bank has provided funding for the development of the EAC Financial Sector Development & Regionalization Project and Financial Services is one of the 7 trade in services sectors to be liberalized under the EAC Common Market Protocol on the Free Movement of Services.

Setting up of the NIFC along with legal and institutional reforms are some of the projects envisioned for the financial sector under the country’s economic blueprint — vision 2030 — along with banking sector consolidation, pension reform and increasing diaspora remittances.

The NIFC would also have a separate legal and judicial framework that would attract companies to set up shop.

See related story here.

EAC Financial Services and Double Taxation Avoidance Treaty

noreply@blogger.com (Lynette Gitonga) — Wed, 16 Feb 2011 14:06:00 +0000

The 9 year EAC Financial Sector Development & Regionalization Project, funded by the World Bank is a welcome development. A strong regional financial sector is needed to underpin an effective common market and build a single financial services market for the region. The development of a regional financial services sector, will also benefit the establishment of a monetary union and single currency. In addition, the EAC region stands to gain by trading on a regional stock exchange, i.e a single East African Stock Exchange and furthermore, the harmonization of the financial services sector will play a key role in unlocking the removal of barriers for the free movement of capital across the EAC region- as provided for by the Common Market Protocol.

In related news, the EAC region has apparently not implemented the Treaty on Avoidance of Double Taxation. The Double Taxation Treaty would allow income generated in any of the five member states to be taxed only once but lack of implementation has given national revenue bodies the legitimacy to maintain the status quo with revenue authorities making double claims for revenue earned in each individual country.

Why Investors are Flocking to Mauritius

noreply@blogger.com (Lynette Gitonga) — Thu, 03 Feb 2011 10:47:00 +0000

Foreign companies with an eye on Africa’s emerging markets are apparently flocking to Mauritius to incorporate local subsidiaries in a move that could deny more than a dozen African governments billions in corporate taxes and position the island nation as the region’s economic hub.

Why is that?

Possibly the the range of incentives available to foreign firms in Mauritius. This includes a 15 per cent charge on a company’s taxable income such as business or trading profits. This amount is half the almost 30 per cent rate that other countries in the region apply to similar income.

Foreigners living in Mauritius are also apparently spared royalty taxes compared to other countries in the region who in some cases tax at the rate of 20 per cent. In addition, Mauritius has more than 30 double taxation treaties with African countries alone and has recently entered into Investment Promotion and Protection Agreements (IPPAs) with its double taxation partners.

Finally an efficient judicial and dispute resolution mechanisms has also given Mauritius an edge over the competition in Africa, with the The World Bank’s Doing Business 2011 report, ranking Mauritius’ judicial system as the best in Africa in terms of reforms aimed at facilitating business and investment transactions.

See related full article here.