INTERNATIONAL

How home country measures can promote foreign direct investment in poor economies – Foreign direct investment (FDI) constitutes a dominant part of private capital flows to least developed countries (LDCs). According to the UN Committee for Development Policy (CDP), FDI can lead to tangible and intangible benefits, playing a catalytic role in building and strengthening productive capacity and export growth, including developmental objectives such as technology and skills transfer, employment generation, higher wages and poverty eradication. However, the total share of global FDI flows to LDCs remains very low and is often directed at resource extraction. Whereas many studies have focused on the measures undertaken by host countries to attract FDI, little research has been conducted on what development partners can do to promote and facilitate more sustainable FDI to LDCs – either directly or indirectly. Here we look at these home country measures and how they can influence the flow of productive foreign investment to poor host economies. In a paper for the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UNOHRLLS), and a recent study for the World Trade Forum, we argue that development partners could play a larger role in fostering sustainable foreign investment in LDCs both through direct and indirect measures. (Trade4devnews)

 Key Words: FDI, Global Trade, Business

Global Growth: Modest Pickup to 2.5% in 2020 amid Mounting Debt and Slowing Productivity Growth - Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist, the World Bank says in its January 2020 Global Economic Prospects. Growth among advanced economies as a group is anticipated to slip to 1.4% in 2020 in part due to continued softness in manufacturing. Growth in emerging market and developing economies is expected to accelerate this year to 4.1%. This rebound is not broad-based; instead, it assumes improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness. About a third of emerging market and developing economies are projected to decelerate this year due to weaker-than-expected exports and investment. “With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth.” U.S. growth is forecast to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty. Euro Area growth is projected to slip to a downwardly revised 1% in 2020 amid weak industrial activity. (World Bank)

Key Words: World Bank, Global Trade, Business

Operational production costs in oil and gas industry have fallen globally – Operational production costs in the oil and gas industry have fallen across the globe, with the UK emerging as a cost-cutting powerhouse among global offshore regions, according to an analysis by Rystad Energy. The results, based on regional opex reduction per barrel, stated that between 2014 and 2018 the UK reduced operational production costs by 31 per cent, followed by Norway and the US with opex reductions of 19 per cent and 15 per cent, respectively. Sara Sottilotta, Oilfield Service analyst at Rystad Energy, said, “The reduction in operating expenditure is largely the result of offshore regions – such as the UK, Brazil, Nigeria, Angola, the Gulf of Mexico and Norway – feeling the squeeze of uncertain oil prices, which in turn has driven operators and contractors to nurture operational improvements in pursuit of lower unit prices.” Secondly, with a greater focus on strategic planning, more efficient maintenance management and the increased and improved implementation of technology, opex per barrel of oil equivalent (boe) has fallen. It should be noted, however, that in times of downturn some opex reduction has historically been a consequence of maintenance deferral. “The drop is attributable to two main factors: the general increase in production and the falling share of production from mature fields as new fields came on-stream and old fields were shut-in,” Sottilotta added. Changing rotation cycles, the closing of older fields and lower salaries have also contributed to the reduced cost levels. (Oil Review Africa)

Key Words: Oil and Gas industry, Global Trade, Economic Growth

Do Differences in the Types of Commodities Exported Matter for Export Concentration? – Many developing economies are characterized by a highly concentrated export sector. In these countries, exports are often limited to a small number of products, and in several cases, one primary commodity accounts for more than half of a country's total export earnings. In the developing world, export commodity dependence is pervasive. Almost two-thirds of developing countries are commodity-dependent, meaning that at least 60 per cent of their merchandise export revenues come from commodity exports. Poor countries are particularly commodity dependent. Indeed, 85 per cent of Least Developed Countries (LDCs) and 81 per cent of Land-Locked Developing Countries (LLDCs) are commodity-dependent. The total number of commodity dependent countries stands at 102 countries. What determines such high concentration on commodity exports? Different studies have found that determinants of export concentration include the level of development of a country (measured by GDP per capita), the size of the economy (measured by population or GDP size), trade barriers and costs, the terms of trade, export prices, composition of production factors including natural resource endowments, indicators of human and physical capital stock, and institutional quality. This paper adds to the literature by examining whether the type of commodity dominating a country's exports matters for export concentration. (UNCTAD)

Key Words: UNCTAD, Global Trade, Export

World Development Report 2021 – Data for Development - This topic comes at a critical time for development. We know that high quality development data is the foundation for meaningful policy-making, effective public service delivery, transparent accountability and increased economic activity through private sector growth. As we enter the final decade in which to achieve the Sustainable Development Goals (SDGs), we find ourselves amid revolutionary changes in how we collect, manage, curate, analyze and use data. It’s claimed that more data was created in 2015 and 2016 than in all previous years combined. Fixed internet traffic is expected to double, mobile internet traffic to quadruple between 2017 and 2021. New business models based on the collection and analysis of data have gained increasing economic significance, with data-oriented companies now among the largest globally by market capitalization. Even as these technological advances improve the availability and use of data, data is still scarce where it’s most needed.   How can these varied data sources help inform development policy and improve the lives of poor people? What policies are needed so that the developing world can capture the economic opportunities offered by the data-driven economy while minimizing associated risks?  While data issues are being widely debated globally, the contribution of the WDR 2021 will be to address data-related questions from the perspective of low- and middle-income countries. (World Bank Blog)

Key Words: World Bank, WDR, Global Business

PAN AFRICAN

Social and environmental factors are key to successful investment in Africa, stakeholders say – What types of sustainable investments are investment promotion agencies (IPAs) of Ethiopia, Kenya, Mozambique and Zambia looking to attract? Why consider social and environmental factors in investment decisions? Does this make business sense? These were among the questions addressed during a meeting on sustainable investment in Ethiopia, Kenya, Mozambique and Zambia organized on 6 November 2019 by the International Trade Centre (ITC), under the Partnership for Investment and Growth in Africa (PIGA) project in collaboration with the Investment Promotion Agency of the Ministry of Commerce of the People’s Republic of China. The dialogue gathered investment promotion agencies’ representatives from the four countries where PIGA is active – Ethiopia, Kenya, Mozambique and Zambia – and Chinese investors operating in them, as well as sustainability experts and business representatives. The message that social and economic development aims – like reducing poverty, boosting incomes, and securing food and energy – go hand-in-hand with investment choices in Africa came through loud and clear from people at the meeting. “Zambia has developed a national promotion strategy to help achieve Vision 2030 of becoming a middle-income country,” Mr. Innocent Melu, Investment Manager of the Zambia Development Agency, said. “Investments must be aligned to this strategy centred on the following pillars: inclusiveness, agriculture, energy and education. The focus is on investments that help diversify the economy, add value to natural endowments and generate employment.” (ITC)

Key Words: ITC, Africa, Trade

Finding African Solutions for the Taxation of Digital Trade – The development of the digital economy has brought many public policy and administrative challenges to governments worldwide. Among these is how an international taxation system that was designed for goods trade and physically present companies can work in a world where value crosses borders at lightning speed and co-location is completely unnecessary for a business-to-consumer relationship. There are several initiatives are underway, most notably the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which comprises 155 countries working to reduce tax base erosion and multinational organisation profit shifting, especially in the digital economy. Alongside this, one solution has been simply to not tax digital trade. In 1998, WTO members adopted a Declaration on Global Electronic Commerce which committed members to continuing the existing practice of not imposing customs duties on ‘electronic transmissions’. This moratorium has been periodically renewed since 1998 and was due to expire on 31 December 2019. On 10 December WTO members agreed to retain the status quo, until the 12th Ministerial Conference (MC12) which will be held in Kazakhstan 8-11 June 2020. The 1998 work programme will also continue into 2020 to prepare for a decision at MC12. (tralacBlog)

Key Words: Africa, Digital Trade, Tralac

Local content rules benefit Africa’s scaffolding firms – One of Africa’s most important strategic industries is providing a rich stream of work for the continent’s scaffolding firms. (The oil and gas sector has long supported many of the region’s major economies, such as Nigeria, Angola, Algeria and Egypt. Continued growth in these countries and the emergence of other, newer producer markets is resulting in an opportunity for ambitious scaffolding contractors. In Equatorial Guinea, which has been an oil and gas producer since the late nineties, indigenous service company, Apex Industries, is stepping up its profile in this segment. The company has signed a deal with the Duscaff Organisation, a joint international scaffolding supply company headquartered in Dubai. The deal covers the supply of scaffolding products that comply with the very best in industry and global norms. “Apex is determined to work with the oil sector and build alliances with international companies to add value to Equatorial Guinea’s economy,” said Apex chief executive Leoncio Amada Nze. “This partnership allows us to gain the know-how from a reputable industry leader like Duscaff and work with them to create jobs for our people.” The agreement means Apex Industries and the Duscaff Organisation will be able to support ongoing and future construction and industrial projects both in Equatorial Guinea itself and across the Economic Community of Central African States (CEMAC) region. (African Review)

Key Words: Business, Africa, Trade Agreement

Africa received $1.3bln in venture capital funds in 2019 – Over the year 2019, Africa attracted a total of $1.3 billion in venture capital funds, WeeTracker said in its African Venture Capital Report 2019. Figures are up 84.6% compared to the $725.6 million recorded in 2018. While the amount of investments increased, the number of transactions completed decreased from 458 in 2018 to 427 in 2019. Out of the 54 African countries covered by the report, Nigeria ranks first in terms of the overall amount of financing raised. Africa's largest economy raised $663.24 million in venture capital over the period reviewed. Kenya and South Africa closed the top 3, accounting for more than 75% of venture capital transactions in Africa. Funds were raised from 203 investors in 2019. Technology companies in the financial services (fintech) sector raised the most financing during the year. WeeTracker experts forecasted that the African venture capital market is expected to remain robust in 2020 and will be driven by fintechs, with companies in the logistics, on-demand services and agriculture sectors.  (Ecofin Agency)

Key Words: Africa, Trade, Business

NORTH AFRICA

Panel report adopted regarding Moroccan measures on hot-rolled steel from Turkey – At a meeting of the Dispute Settlement Body (DSB) on 8 January, WTO members formally adopted the panel and Appellate Body reports in a case brought by Turkey regarding anti-dumping measures imposed by Morocco on imports of certain hot-rolled steel products from Turkey. The panel report, circulated to WTO members on 31 October 2018, found that Moroccan authorities had violated several provisions of the WTO's Anti-Dumping Agreement in their investigation on the targeted Turkish imports. On 20 November 2018 Morocco notified its decision to appeal certain panel findings.   On 4 December 2019, the Chair of the Appellate Body informed the DSB that it had received a letter from Morocco indicating the withdrawal of its appeal. The Appellate Body issued its report on 10 December stating that, in view of Morocco's withdrawal of the appeal, it had completed its work and that the 30-day period for the DSB's formal adoption of the ruling began from the circulation of the Appellate Body report.  The DSB adopted the panel report and Appellate Body report. Morocco will now have 30 days to inform the DSB of its intentions in regards to the implementation of the ruling. (WTO)

Key Words: North Africa, Business, WTO

FOPRODEX unveils raft of measures to encourage prospection of ten African markets – The Exports Promotion Fund (French: FOPRODEX) unveiled a package of measures to encourage Tunisian businesses wishing to undertake prospecting missions in a number of African countries, namely Kenya, Tanzania, Ethiopia, Djibouti, Nigeria, Cameroon, Benin, Rwanda, DR Congo and Ghana, the Exports Promotion Centre (French:CEPEX) said. This includes the reimbursement of 70% of the air ticket price and as much of a 600 dinar/day allowance over a period not exceeding 5 days for two representatives of each business in one prospecting mission. Though sub-Saharan Africa boasts some of the world's fastest-growing economies, only 2.7% of Tunisia's exports are directed towards the continent, CEPEX said in a press release. It is within this framework that the Promotion of Employment-Intensive Export Activities in New Markets in Africa project was put in motion in 2017, in partnership with the German Agency for International Cooperation (GIZ). The project eyes increased access of Tunisian enterprises to sub-Saharan markets.  (TAP)

Key Words: North Africa, Business, Investment Policy

EAST AFRICA

Ethiopian government launches Homegrown Economic Reform Programme – The IMF has approved a US$3bn programme for Ethiopia to support the government’s own Homegrown Economic Reform Programme, which is designed to eliminate macroeconomic imbalances and lay the foundation for sustainable and inclusive growth. The authorities want the economy to transition away from being public sector-led to one that is driven by the private sector. Programme Ownership: The authorities have developed their very own ambitious Homegrown Economic Reform Plan tailored to the country’s needs and preferences. They have engaged in wide-ranging outreach to discuss the economy’s future with key stakeholders and have taken important initial steps to implement reforms. Programme details: The IMF approved the Ethiopian authorities’ request for an almost US$3bn loan under its Extended Credit Facility and Extended Fund Facility to back the Homegrown Economic Reform Plan. As well as helping to address the foreign exchange shortage, the programme will also aim to reduce debt vulnerabilities. Other key objectives include reforming the financial sector and boosting revenue mobilization which will be supported by the provision of technical assistance and training. Aims of the programme: The programme builds on the authorities’ actions by ensuring public sector borrowing is in line with lower debt levels and stronger oversight of state-owned enterprises. Monetary policy will aim to bring inflation into single digits. (African Review)

Key Words: East Africa, Business, Trade

Ethiopian PM Launches Electronic Single Window Project – Ethiopian Prime Minister Abiy Ahmed has officially launched the Ethiopia Electronic Single Window Project. The Project connects 16 regulatory agencies and enables traders to process all documentation relating to import and export through a single electronic submission. By creating a paperless environment, eliminating multiple physical inspections and repetitive document submissions, the Electronic Single Window Project (eSW) will reduce clearance time from 44 days to 13 days, and eventually to just 3 days, the Office of the Prime Minister said in a tweet. The Office of the Prime Minister further said eSW will reduce corruption by minimizing opportunities for physical interaction. (2merkato.com)

Key Words: East Africa, Business, Trade

WEST AFRICA

Côte d'Ivoire sets new tax provisions to support the private sector – The Ivorian government has adopted new provisions in the Fiscal Annex 2020 to support private sector development. These include 29 measures of tax exemption, tax rate increases, tax suspension, and creation of new taxes; as well as the clarification and improvement of tax management modalities. With this new step, the government wants to speed up the objectives set in the National Development Plan (NDP) 2016-2020, and deepen the structural transformation of the country's economy through industrialization. It also plans to promote industrial activities, in particular, the transformation of agricultural raw materials into finished and semi-finished products. Ultimately, the new provisions are in line with the country’s desire to promote the structural transformation of the national economy through industrialization. (Ecofin)

Key Words: West Africa, Trade, Regional Integration

CENTRAL AFRICA

CEMAC: BDEAC approves XAF126 bln financing for integration projects – The Board of Directors of the Development Bank of Central African States (BDEAC), after meeting at the end of December 2019, under the chairmanship of Komidor Njimoluh Hamidou, Cameroon's Ambassador to the Republic of Congo, approved the financing of integration projects amounting to XAF126 billion for Cameroon, Congo, Gabon and Equatorial Guinea. These projects eligible for BDEAC financing are in the energy, social housing, agro-industry, microfinance, and agropastoral sectors. “Their implementation will not only significantly improve the quality of life of populations but also strengthen regional integration, particularly through interconnections of the electricity networks of Equatorial Guinea and Gabon,” BDEAC said. In addition, with this new financing, the Bank indicates that it intends to reach the most vulnerable populations in the CEMAC zone with, in particular, job creation and access to decent housing. This decision by the Board of Directors comes at a time when five projects totaling XAF155 billion, validated by the same body, are awaiting financing. In an internal note, the central bank of CEMAC (BEAC) indicates that continuing to provide financial support to BDEAC poses a risk to its free equity capital.  (Business in Cameroon)

Key Words: Central Africa, Trade, Regional Integration

SOUTHERN AFRICA

Finding investment opportunities in 2020 - On 1 January 2020, the South African rand was trading at R14.01 to the US dollar, gold was priced at $1,520 an ounce and base metal prices had ticked up, suggesting that global manufacturing may be trending upwards.  This boded well for a poorly performing South African economy, which is heavily reliant on commodity cycles and a global manufacturing appetite for its raw materials.  In 2019, firmer metal prices created positive momentum on the JSE resources index, which delivered returns of 28% for the year. Investors were hoping this would continue and perhaps rub off on other sectors of the exchange where returns in 2019 were patchy.  Overall, the All Share Index returned 12.05% (thanks in part to resources and other Top40 stocks) in 2019, but a closer look shows this was not generalised across the board and in many sectors prices fell off dramatically as companies failed to deliver the promised returns.  Small-cap stocks, in particular, were punished, returning a negative 8% for the year.  Any positive sentiment that investors may have had on the eve of 2020 evaporated two days later when US President Donald Trump gave the go-ahead to the US military to assassinate Iranian commander Qasem Soleimani. The rand is now trading at R14.27 to the dollar, the spot price of gold is $1,582.74, the oil price surged overnight and base metal prices have fallen as investors reverted to risk-off sentiment.  (Daily Maverick)

Key Words: SA, Economic Growth, Business