Archive for October, 2009
We drink soda from cans made of aluminum mined in Australia, wear shoes made in Europe, eat fruit from South America, build machinery from steel milled in Asia, wear clothes made from African cotton, and live in homes built from North American wood. We take it for granted, yet before we can enjoy these products and materials, traders must negotiate prices and deliver the goods through a network of relationships that literally spans the globe.
Play this game to experience the challenges and excitement of international trade. See if you can get the best price for the goods you sell and the biggest bargains for the goods you buy. Watch how the global economy is doing: the prices you’ll be able to get and the deals you can make depend on how healthy the global economy is.
Before you start, think about what you want to accomplish as a trader:
- Do you want to build up as much wealth as you can by selling as much of your commodities as you can?
- Do you want to buy the widest range of goods to satisfy diverse consumer tastes at home?
- Or do you want to focus on buying the raw materials for a particular industry?
The only limit is your imagination, your negotiating skills, and your bank account.
The Executive Board of the International Monetary Fund (IMF) today approved a 14-month, SDR 153.755 million (about US$240.6 million) arrangement under the Exogenous Shocks Facility (ESF) to help Ethiopia cope with the effects of the global recession on its balance of payments. The arrangement (115 percent of Ethiopia’s quota) was approved under the high access component of the ESF, a facility designed to provide policy support and financial assistance on concessional terms to eligible low-income countries facing temporary exogenous shocks. A disbursement of SDR 73.535 million (about US$115.1 million) will become available following the Board’s decision.
Following the Executive Board discussion, Mr Takatoshi Kato, Deputy Managing Director and Acting Chair, issued the following statement:
“Ethiopia’s economy has been adversely affected by a series of shocks, first from surging commodity prices in 2008, and most recently from the global recession. While the authorities have been successfully implementing a macroeconomic adjustment package since late 2008 to help lower inflation and build up international reserves, the global recession is now putting renewed pressure on the external position as export receipts and remittances weaken and inward direct investment slows.
“The authorities have adopted an appropriate program for 2009/10 to address the strains on the balance of payments and to keep inflation low. Seeking a balance among conflicting objectives—limiting inflation, rebuilding reserves, accommodating higher capital outlays, unwinding recent real exchange rate appreciation—their program calls for a continued tight fiscal stance (though eased somewhat from 2008/09), a slowing of the pace of monetary growth, and gradual real exchange rate adjustment, aided by a step depreciation of the birr on July 10, 2009.
“The general government budget for 2009/10 envisages some easing of the tight limits on public spending instituted last year, financed by a mix of external and domestic borrowing. Public sector domestic borrowing will be contained to 3 percent of GDP, with the government acting to improve controls over borrowing by public enterprises and monitoring carefully external debt levels to ensure debt sustainability. The authorities are committed to crafting a tax reform strategy, aimed at reversing the decline in the tax-to-GDP ratio recorded in recent years.
“Monetary policy focuses on entrenching single-digit inflation by providing a strong nominal anchor. The monetary program seeks to limit broad money growth to 17 percent for 2009/10, with the National Bank of Ethiopia seeking to enhance its control over reserve money by systematic use of the regular Treasury-bill auctions to manage liquidity.
“Prudent implementation of this program, accompanied by planned reform measures, will provide a sound macroeconomic environment for economic growth. The financial support being provided under the Exogenous Shocks Facility, coupled with the new allocation of SDRs, will further boost foreign reserves, thereby enhancing confidence in the sustainability of the government’s economic program.”
By Susan Fenton
HONG KONG (Reuters) – Global consumer confidence is rebounding, and in the United States has risen for the first time since 2007, amid signs the world economy is picking up although spending is still restrained, a survey showed on Wednesday.
Confidence was highest in India, followed by Indonesia and Norway, and was weakest in Japan, Latvia, Portugal and South Korea, although in Korea it had improved markedly, according to a quarterly survey by The Nielsen Company, conducted between September 28 and October 16.
“Consumer confidence is rising faster in BRIC countries than other markets, driven by increasing job prospects,” Oliver Rust, managing director of Nielsen Hong Kong, told Reuters.
In the United States and Europe, high unemployment continued to discourage spending on big-ticket items although confidence had improved as the worst appeared to be over for those economies, New York-based Nielsen said.
In the United States — the world’s biggest consumer market — consumer sentiment rose from three months ago for the first time since early 2007. The data contrasts with a Conference Board index of U.S. consumer confidence, released on Tuesday, which showed a sharp deterioration in confidence this month.
The U.S. reading in The Nielsen Global Consumer Confidence survey at 84 was up 4 points from a similar survey in July but just below the global average reading of 86 and well below India’s score of 120 and Indonesia on 115.
“While consumer confidence in the United States edged up 4 index points, that hasn’t translated into spending confidence for the vast majority of American consumers,” said James Russo, vice-president, global consumer insights at The Nielsen Company. “Clearly, this recovery will be manifested in measured and restrained spending as consumers work to repair their balance sheets.”
A reading above 100 is considered optimistic. The global average was up four points from a similar survey in July.
African countries are drawing up a unified position this week to try to pry open the markets of developed countries ahead of a World Trade Organisation (WTO) ministerial conference in Geneva on November 30.
Delegates to an African trade ministers conference that opened in Cairo today said continuing delays on a new global trade deal was crippling African development, especially in the wake of the global economic crisis. “Africa needs an early, balanced and fast conclusion of this round. So it will be an appeal to the major players to come to the table, because this time around, it’s not Africa who is delaying the process,” said SB Naresh Servansing, a delegate from Mauritius.
African nations are seeking broader access to developed markets of their agricultural produce in particular, especially cotton, which is grown widely across the continent. They also complain that subsidies to producers in rich countries, particularly to US cotton growers, are distorting world trade to the detriment of producers in poorer countries. Servansing, chief negotiator for the 79-member group of African, Caribbean and Pacific countries at the WTO, said talks should be all inclusive in a way that allows African and other vulnerable countries put their concerns on the table.
Despite an intensive work programme agreed last month, WTO talks have not achieved enough to reach a core deal in implementing the Doha negotiations, now in their eighth year. “It’s important because trade is one of the engines of growth,” Egyptian Ambassador Hisham Badr, African Coordinator for WTO matters in Geneva, said on the meeting sidelines.
The failure to enact the Doha trade pact and the global financial crisis had caused private investment to fall by 40% in 2008 and African losses from exports of $251 billion in 2009, Badr said in a statement to the meeting. The three-day WTO conference that begins on November 30 will not include negotiations, but will give African nations a chance for their views to be heard, delegates said. The WTO’s Director-General Pasqua Lamy said on Oct. 23 that a 2010 target for a commerce deal was out of reach unless countries accelerate their negotiations. – Reuters
By Stephanie Nieuwoudt CAPE TOWN, Oct 26 (IPS)
With its recent history of tremendous economic growth, China has a few lessons to teach Africans. But African governments should be vigilant in ensuring that their countries also reap benefits from their relations with China. This warning emanated from a number of participants at the China-Africa Business Summit held Oct. 22-23, sponsored jointly by Corporate Africa, a publication of the UK-based Times Media Group, and the China-Africa Business Council, a non-governmental organisation promoting private investments in Africa. Surprisingly, given China’s ever-growing presence on the continent, the attendance figure at the summit was far below the expected 1,000, with only about 100 delegates arriving, forcing a last minute change of venue. But some fascinating inputs were nevertheless made. Professor Festus Fajana, a trade policy expert at the African Union, said that “equal partnerships are important to ensure sustainable development”. He urged African governments to be vigilant in ensuring that bilateral agreements with China are of mutual benefit. “Africa wants sustainable economic growth and the continent wants diversified economies in order to reduce dependence on its traditional (Western) trade partners,” explained Fajana. “Africa exports 80 percent of its oil and minerals to China. But Africa should not just be seen as a source of raw materials. “Its economies should be diversified to take advantage of the huge Chinese market with its need for other products as well. There is, for example, great potential for agricultural products to be exported to China,” he suggested. The world is seeing a new “coupling” of Southern countries and China, with the latter’s insatiable demand for minerals underpinning the growth of sub-Saharan African economies, stated Dr Martyn Davies, executive director at the Centre for Chinese Studies attached to the University of Stellenbosch near Cape Town. The centre promotes exchanges of ideas, experiences and knowledge with a view to promoting analysis of the relations between Africa and China. He believes that, “China’s growth will depend on Africa’s ability to supply those goods.” Likewise, Africa’s advancement is related to the well-being of China. “China is on target to easily meet a GDP (gross domestic product) growth of eight percent. This is no mean feat in the current economic climate.” Trade between China and Africa in 2008 was worth 107 billion dollars – a 45 percent increase from 2007. China has been under intermittent fire about its bad human rights and environmental record and its disregard for democratic practice. It was recently slated for closing a seven billion dollar deal with Guinea, a country that suffered a military coup at the end of 2008. Several audience members found an echo in Africans’ experience of China on the continent. “Ordinary citizens get very little in turn,” one delegate argued. “Government officials sign deals and pocket huge sums of money. The Chinese come to Africa and take our riches away. But the Chinese markets are closed to African entrepreneurs.” Regarding a way forward that could benefit both Africans and Chinese, Dr Rita Cooma, CEO of a New York-based management consulting firm, presented an investment model that could maximize value and investor returns with mutual pay-offs. The model focuses on government practices and social equity (which recognises the rights and needs of citizens), economic prosperity (maintaining stable levels of economic growth and employment) and environmental sustainability (the prudent use of natural resources and effective protection of the environment). Cooma emphasised the need for the training and development of African entrepreneurs by Chinese organisations. The Chinese are highly skilled in disciplines like engineering and in industries such as telecommunications – skills that are severely lacking in Africa. Chinese investors should employ African citizens and not use an imported Chinese workforce, one of the main gripes with Chinese business practice on the continent. “Investing in schools and healthcare facilities strengthen the labour supply and contribute to economic and social development,” added Cooma. To ensure accountability and transparency, Cooma recommended the development and global ratification of disclosure standards that have to be adhered to by investor and host country. These standards pertain to labour and environmental practices. There should also be a global reporting initiative which collects data and reports on specific social, economic and environmental impacts.
At the start of the 21st century it is not the distance between us that defines the world and our place in it. We are defined today by the connections that bind us together. Places that once seemed far away can now be reached by many of us within a few hours, or emailed within seconds. Global technology and global flows of capital, goods and services have brought us closer to rapidly emerging economies such as China and India. Yet at the same time, the world remains too unequal, too unsafe and too unsustainable. Nearly a billion people still live in extreme poverty, unable to benefit from the new global connections – while those very same connections have made this inequality more visible, both to people in the developed and developing worlds.
By 2010, half of the world’s poorest people will be in countries at risk of, or recovering from conflict. The early years of this century have shown us, in the most stark way that developed countries cannot pull up the drawbridge from conflict within and between such fragile states.
Climate change, which threatens all of our futures, is a reality right now for many in the developing world. Last autumn I met with people forced from their homes by flash floods in northern Kenya. “Climate change”, one of the local leaders told me, “hits us hardest”.
The world has shown before that it can come together to form a shared vision for ending world poverty. The Millennium Development Goals – agreed at the United Nations Summit in September 2000 – show what is possible when nation states co-operate out of mutual interest and a shared sense of moral responsibility.
Yet the aims set out by world leaders in 2000 – to tackle hunger, illiteracy and sickness – are now at risk from global threats such as climate change, conflict and economic instability.
These threats are global in their nature and their impact – so our solutions must be global too. Yet the pillars of our present international system, formed some 60 years ago, no longer reflect the world as it is today. They were not built to deal with challenges such as climate change, nor do they reflect the importance of emerging powers such as India and China. That is why the Prime Minister, Gordon Brown (see page 4), has called for reform of our international institutions – to ensure that they are fit for the 21st century and equipped to deliver for the world’s poorest people. Such reform is needed in the areas of trade, conflict, climate change and the way international institutions themselves do business.
We need a global trade deal that benefits all countries. Trade is the engine of economic growth, and economic growth is the surest route out of poverty for countries and individuals alike. We must both consider and agree new global trade rules and create new global institutions so that not some but all can benefit from change.
Too often the international community’s response in countries emerging from conflict is too little, too late and too fragmented. Those failures are measured in the genocide in Rwanda, and the ongoing tragedy in Darfur. We need a package of measures to better respond to conflict, including greater leadership by the UN, faster deployment of skilled civilians to help rebuild shattered institutions, and more rapid and flexible funding.
We must also work internationally to tackle climate change and environmental degradation. For if we do not take the necessary action, we risk condemning the world’s poorest people to generations of further poverty. Above all, we must direct our international efforts towards creating a post-Kyoto agreement that sets a global limit for greenhouse gases, and a credible way of reaching it.
We also need a reformed World Bank for both the development and the environment, to provide the incentives and funding for developing countries to safeguard their natural resources, protect their vulnerable communities and grow in a low-carbon way. The UK’s £800 million environmental transformation fund will form one cornerstone of this work. International institutions should become more representative of the world we live in – the IMF and World Bank should change their boards and voting rights to reflect the world’s changing economic balance. And international institutions must also reform to ensure better coordination and less duplication. This seemingly technical agenda was made real for me through one girl’s story. After the Asian tsunami in 2004, doctors became concerned over a case of a little girl with measles – fearing an outbreak of the disease. Yet her quick recovery led the doctors to a peculiar discovery. The measles symptoms were in fact a result of the girl receiving the same vaccine three times, from three different organizations.
We are closer to our global neighbours than ever before. Whether facing conflict, the spread of disease or the impact of climate change, there is no longer an ‘over there’ and ‘over here’. So we must find shared solutions to our shared problems. I believe that we have the knowledge and the skills to make our world more equal, safer and more sustainable. We must now show the commitment needed to make that change.
Source Development Magazine
A good example
Oct 22nd 2009
From The Economist print edition
One of Africa’s most successful countries sets a trend that more can follow
IT IS not surprising that Botswana has topped polls as continental Africa’s best-run country. Since independence in 1966, it has consistently held unfettered multi-party elections. It was blessed with a fine founding president, Sir Seretse Khama, succeeded by three decent leaders, the present one being his son Ian, who was handsomely re-elected this week (see article). It has an abundance of diamonds and successive governments have husbanded the country’s resources. Average income has tripled in real terms in two decades, putting Botswana on a par with Mexico.
You can pick holes in the idea of Botswana as a model for Africa. It has been lucky in its mineral wealth, at first shrewdly developed by De Beers, the South African diamond giant. Its population of barely 2m is ethnically pretty homogeneous, whereas most African countries contain a far headier concoction of tribes within boundaries crudely drawn by colonial map-makers. And it has had its troubles, including one of the highest incidences of HIV/AIDS. It has lacked sympathy for its anti-modern Bushmen minority. And now the world slump has clobbered Botswana’s diamond industry, squeezing GDP by a tenth. Above all, its leaders have yet to be challenged by a strong opposition; a single party has ruled since independence. That is one reason why it was Ghana, a recent success in development and democracy, that won the accolade of Barack Obama’s first presidential visit to a sub-Saharan country, after its government graciously let itself be chucked out at the polls.
Ghana is exceptional in letting power change hands after a really close election result. In South Africa, the continent’s most powerful country, where democracy is fairly well established and independent institutions fairly robust, there is no imminent prospect of the African National Congress being voted out. The country’s ultimate democratic test will come when the ANC one day faces the prospect of defeat. As for Botswana, its people merrily vote the same party back into power. Yet they do not feel disenfranchised. Over the years their country has proved a paragon of good governance and an example to its bigger African brothers. Can others follow?
Does Microfinance Really Help Poor People? How? And how do we know?
By Richard Rosenberg: Monday, October 5, 2009
Since microfinance first came to public attention in the 1980’s, the usual story line has been that it funds creation and expansion of microenterprises, producing additional income that lifts the borrowers’ households out of poverty. But is it true?
It has been clear for some years now that many–sometimes most–micro borrowers in fact use their loan proceeds for non-business purposes. Recent analysis has cast doubt on some of the older research studies that found that microcredit increases household income. A new generation of more rigorous randomized studies is now in the works. The first two of them to be published have not found evidence that microcredit raised household income and consumption, at least over the 1-1.5 year term of the studies. Does this mean that microcredit might have been a bad idea all these years? I’ve just drafted a brief paper on this question. The paper should be available in a month or two, but in the meantime let me trot out its core arguments.
I think an honest appraisal of the current state of the evidence is that we simply do not know whether microcredit raises incomes and consumption. If the case for microfinance depended on whether it was lifting people out of poverty, then the appropriate response right now would probably be to declare a moratorium on support for microfinance until further research clarifies this question more.
I’ve worked in microfinance for over a quarter of a century, and I’ve always been agnostic about whether microcredit raises incomes. But I’m pretty sure that it does some other things that are very important to poor people, helping them to cope with poverty whether or not it helps them escape poverty. These other benefits are described compellingly in the brilliant new book Portfolios of the Poor by Daryl Collins et al., which gives a high-resolution picture of how low-income households actually use financial services, based on hundreds of 18-month-long financial diaries in three countries. Portfolios points out that the problem with being poor is not just that income is low, but also that it tends to be uneven and vulnerable to disruption. Given the variability and vulnerability of their income, poor households have to save and borrow constantly (more so than richer households) in order to put food on the table and meet other consumption needs. The informal credit and savings mechanisms they have tend to be unreliable. They value formal microfinance highly because it is more reliable, even if it is often less flexible than their other tools to manage their cash flow.
When we hear that microcredit may not lift people out of poverty, we tend to be disappointed, and regard consumption-smoothing as a “mere palliative.” But we react this way only because our own basic consumption needs are seldom if ever threatened. As Portfolios demonstrates, poor people see it very differently.
I think there is strong evidence that poor people find microcredit very valuable in helping to deal with their circumstances. When you offer microcredit in a new setting, you almost never have to advertise: customers come out of the woodwork in droves. Most of them come back for additional loans. Most important, they usually repay those loans at extremely high rates year after year, when the main motive to repay is not collateral or group pressure, but rather their desire to keep future access to a service they find very helpful. They are voting with their feet.
But does microcredit hurt a lot of poor people by over-indebting them? We need more work on this question, but I think the general answer is very probably no. When a lender is over-indebting a lot of borrowers in a bad situation, sooner or later it will show up high default rates, just as it did in the current financial crisis. But the predominant pattern is that the vast majority of micro borrowers repay at very high levels year after year (cf. my posting a couple of weeks ago on repayment rates).
When all is said and done, a year of microcredit probably doesn’t help poor people as much as a year of girls’ primary education (for instance). The value proposition of microcredit and microfinance more generally, is that each “dose” costs far less. Education, health, and many other social services require large subsidies year after year. When microfinance is done right–and only when it’s done right–small one-time initial subsidies can generate service delivery to very large numbers of people year after year. Not only is no further subsidy needed, but microfinance providers can leverage their initial subsidies with very large multiples of commercial funds. This is not a pipe dream–it’s happening already in dozens, even hundreds, of cases all over the world. For instance, BancoSol in Bolivia represents a few million dollars of donor subsidies in the mid-1990s that have turned into $200 million of loan portfolio and services for 300,000 active savers and borrowers as of the end of 2008. Whether donors and other public funders now lose interest in microfinance is pretty much irrelevant to such MFIs.
For me, this is the strong value proposition of microfinance. The benefits of each dose may turn out to be more modest than some have claimed, but poor people really value those doses, and you can buy an awful lot of them with relatively little subsidy. We certainly need further research on the nature and extent of benefits of microfinance, but I think it’s a very good bet that the observed behavior of millions of micro borrowers is telling us that those benefits more than justify the investment.
British and Saudi companies have each reported finding important gold deposits in Ethiopia raisin government hopes of significant income from gold mining.
Posted: Sunday, 25 Oct 2009
ADDIS ABABA (REUTERS) -
Two mining companies have discovered gold deposits in Ethiopia that could yield up to 41 tones, a top government mining official said on Friday.
Gebre Egziabher Mekonen, head of the Mineral Operation Department in the Ministry of Mines and Energy, told Reuters the Golden Prospecting Mining Co., a British firm, had found a deposit of about 23 tones in western Ethiopia.
“Discoveries by the British firm indicated that there is a viable prospect for gold mine development in the area. But it takes up to $200 million further investment to exploit the resources roughly within the next five to 10 years,” he said.
Sakaro, a mining company operating under Midroc Gold Co., owned by Saudi business tycoon Sheik Mohammed Hussein Al Amoudi, has also discovered a new deposit estimated at 18 tons in the Lege-Dembi gold belt, Gebre Egziabher said.
The Golden Prospecting Mining discovery is at Tulu-Kapi, about 450 km (279.6 miles) west of the capital Addis Ababa and near the border with Sudan.
The company is also exploring another site near Tulu-Kapi, which has indications of a separate reserve of 30 tones, Gebre Egziabher said.
Once the two proven gold deposits were developed into mines, Ethiopia’s annual income from the sector could reach up to $1.7 billion a year at current prices, from the present $105 million a year, he said.
Ethiopia has earned $450.5 million from nearly 48 tons of gold exports in the last 10 years, according to statistics by the National Bank of Ethiopia.
The country says it has indentified possible reserves of up to 500 tons in different parts of the country.
Gebre Egziabher said 44 international and local companies were engaged in mineral exploration throughout the country.
The government issued mining regulations in 1993 giving foreign investor’s incentives such as duty-free imports of equipment and repatriation of profits.
Source: © Thomson Reuters 2009 All rights reserved
* Saudi-owned company’s mine dominates production
* Government aims to increase output
* Up to 1,000 kg of gold a year lost to smugglers
ADDIS ABABA, Oct 12 (Reuters) — Ethiopia earned $540.5 million from nearly 48 tonnes of gold exports in the last 10 years, the National Bank of Ethiopia said on Monday.
Some 47.9 tonnes, worth $520.5 million, was produced by the Lege Dembi mine, run by the private Midroc Gold Mine, the bank said. Lege Dembi is in the Adola gold belt 300 km southeast of the capital.
The balance of 693.3 kg worth $20 million was produced by artisanal miners, the bank said.
Midroc Gold Mine, which is owned by Saudi Arabian financier Sheik Mohammed Hussein Al Amoudi, paid $175 million in 1998 to win an international bid to run the mine for 20 years.
Midroc holds rights to produce gold in an area of 85 square km as part of a plan to boost Ethiopia’s gold output.
Officials say Ethiopia loses up to 1,000 kg of gold worth $10 million every year in contraband trade between artisanal miners in the south of the country and smugglers from neighbouring countries.
Ethiopia has identified “possible and probable” untapped gold reserve of up to 500 tonnes in different parts of the country, the ministry of mines said.
It issued a mining proclamation and regulations that gave foreign investors incentives such as duty free imports of equipment and repatriation of profits in 1993.
Since then 12 foreign companies have signed agreements to explore for gold, base metals, gemstones and petroleum across the country, the ministry said. (Reporting by Tsegaye Tadesse; editing by Anthony Barker).