> Headlines by Category

Washington, February 7, 2012 – With African leaders now calling for a continental free trade area by 2017 to boost trade within the continent, a new World Bank report shows how African countries are losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighboring countries, and that it is easier for Africa to trade with the rest of the world than with itself.

According to the new report―De-Fragmenting Africa: Deepening Regional Trade Integration

in Goods and Services―regional fragmentation could become even more costly for the continent with new World Bank forecasts suggesting that economic slowdown in the Eurozone could shave Africa’s growth by up to 1.3 percentage points this year. As the authors write, “while uncertainty surrounds the global economy and stagnation is likely to continue in traditional markets in Europe and North America, enormous opportunities for cross-border trade within Africa in food products, basic manufactures and services remain unexploited.”

The reports says this situation deprives the continent of new sources of economic growth, new jobs, and sharply falling poverty, factors which accompanied significant trade integration in East Asia and other regions. The cross-border production networks that have spurred economic dynamism in other regions, especially East Asia, have yet to materialize in Africa.

“It is clear that Africa is not reaching its potential for regional trade, despite the fact that its benefits are enormous—they create larger markets, help countries diversify their economies, reduce costs, improve productivity and help reduce poverty.” says Obiageli "Oby" Ezekwesili, The World Bank’s Vice President for Africa, and a former Nigerian Minister of Extractive Industries. “Yet trade and non-trade barriers remain significant and fall most heavily and disproportionately on poor traders, most of whom are women. African leaders must now back aspiration with action and work together to align the policies, institutions and investments needed to unblock these barriers and to create a dynamic regional market on a scale worthy of Africa’s one billion people and its roughly $2 trillion economy."

In a special World Bank video at: http://vimeo.com/32976732 produced for the new report, women traders on the border with the Democratic Republic of Congo (DRC) and neighboring countries in the Great Lakes region describe how they routinely encounter violence, threats, demands for bribes, and sexual harassment, at the hands of the large numbers of customs and other government officials at the border. As one egg and sugar trader from Goma says on the video: “I buy my eggs in Rwanda; as soon as I cross to Congo I give one egg to every official who asks me. Some days I give away more than 30 eggs!”

Barriers blunt trade in goods as well as services

The report says that until the onset of the financial crisis, most sub-Saharan African (SSA) countries grew rapidly and often at much higher rates than the world average. Economic growth in these countries was robust and driven by the boom in commodity prices, which led to very high growth in export values, especially for minerals, to new fast-growing markets such as India and China. 

While exports have grown strongly over the last decade, and the region’s trade has recovered well from the global crisis, the impact on unemployment and poverty has been disappointing in many countries. Unemployment remains around 24 percent in South Africa. In Tanzania, extreme income-poverty appears to have remained broadly constant at around 35 percent of the population. This shows that export growth has typically been fueled by a small number of mineral and primary products with limited impacts on the wider economy and that formal sectors remain small in many countries.

As a result, the report suggests that Africa will have to diversify its exports from depending solely on precious metals and other commodities and encourage more people to trade goods and professional services in accounting, law, education, healthcare, among others. The region’s large number of young people also calls for significant numbers of new jobs, intensive trade, and growth.  

“Imagine the benefits of allowing African doctors, nurses, teacher, engineers and lawyers to practice anywhere in the continent, but responsibility for making this happen lies with countries first and foremost,” says Marcelo Giugale, the World Bank’s Africa Director for Poverty Reduction and Economic Management. “The final prize is clear: helping Africans trade goods and services with each other. Few contributions carry more development power than that.” 

Changes are needed in three areas

To escape the current straightjacket of trade fragmentation, the report says that African leaders, need to pursue changes in three key areas.

1.     Improving cross-border trade, especially by small poor traders, many of whom are women, by simplifying border procedures, limiting the number of agencies at the border and increasing the professionalism of officials, supporting traders associations, improving the flow of information on market opportunities, and assisting in the spread of new technologies such as cross-border mobile banking that improve access to finance.

2.     Removing a range of non-tariff barriers to trade, such as restrictive rules of origin, import and export bans, and onerous and costly import and export licensing procedures

3.     Reforming regulations and immigration rules that limit the substantial potential for cross-border trade and investment in services.

In one notable example of trade barriers, report co-editors Paul Brenton and Gozde Isik of the World Bank describe how the South African supermarket chain Shoprite spends US$20,000 a week on import permits to distribute meat, milk, and plant-based goods to its stores in Zambia alone. For all countries it operates in, approximately 100 (single entry) import permits are applied for every week; this can rise up to 300 per week in peak periods. As a result of these and other requirements, there can be up to 1,600 documents accompanying each truck Shoprite sends with a load that crosses a border in the region.

As the co-editors write, “lack of coordination across government ministries and regulatory authorities also causes significant delays, particularly in authorizing trade for new products. Another South African retailer took three years to get permission to export processed beef and pork from South Africa to Zambia.”

How the World Bank supports regional integration

Trade and regional integration are core elements of the Bank’s new Africa strategy, launched in March 2011, to help countries create opportunities for their transformation and sustained growth. The Bank has doubled its investment in regional integration from US$2.1 billion in 2008 to US$4.2 billion in July 2011, and it will rise to $5.7 billion by July 2012. 

Contacts

In Washington: Phil Hay +1 (202) 473-1796 and cell +1 (202) 409-2909, phay@worldbank.org

Aby Toure +1 (202) 473-8302 Akonate@worldbank.org 

To see the English version of De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services in full, visit:  http://www.worldbank.org/defragmentingafrica

And to see more on the World Bank’s work in trade and development in Africa, please visit here.  

CAPE TOWN, February 6, 2012 — Mining companies can boost economic growth in West Africa by purchasing more equipment, supplies and services from local companies, says a World Bank report released today.

The study, Increasing Local Procurement by the Mining Industry in West Africa, shows that raising the share of local procurement by mining companies would spread the benefits of mining more evenly across a country’s economy, creating jobs and stimulating the sustainable development of local enterprises.

The report, which focuses on Ghana, Guinea and Senegal, recommends that West African governments work with mining companies, suppliers, and civil society to strengthen definitions and indicators for measuring local procurement, and that mining companies develop and implement local procurement plans.

“Buying local goods and services is a catalyst for private sector development and sustainable growth,” said Obiageli K. Ezekwesili, World Bank’s Vice President for the Africa region, and a former Nigerian Minister of Extractive Industries. “A key message of this study is that mining companies need to be transparent about informing local communities on procurement opportunities, so that these communities can benefit economically from mining operations. Mining companies should not only extract wealth, they must inject opportunity.”  

Potential for local supply

Mining is an economic engine for West Africa, which supplies about nine percent of the world’s bauxite, and eight percent of its gold. This contribution is expected to grow, with large gold, iron ore, and bauxite projects in advanced planning stages, along with unexploited uranium, copper and diamond deposits across the region.

But even if these levels of mining activity involve significant procurement spending, both in capital investment and operational costs, there has so far been only limited participation in mining supply chains by companies based in West Africa. This situation endures despite existing capacity and the potential to expand the capacity of local small and medium enterprises.

Few mining companies in West Africa have established policies to support local procurement, although some efforts have been launched to seek a more consistent, formal approach. There are important potential opportunities for expanding local supply in areas such as camp management, civil works, construction and transport, as well as drilling, mining, and equipment maintenance.

“Local procurement by mining companies can bring significant benefits to a wide range of stakeholders in resource-rich countries,” says Paulo de Sa, manager of the Oil, Gas and Mining unit in the Bank’s Sustainable Energy Department. “Due to the large scale of current and potential mining activity in West Africa, countries have a huge opportunity to realize these socio-economic benefits.”

The report’s main recommendations for stakeholders seeking to seize local procurement opportunities include the following:

• Regional organizations can help develop a harmonized list of products across the region that may be exempted from customs duties, promoting linkages and investment along the mining supply chain, developing a regional list of suppliers, and continuing to facilitate regional trade.

• National governments need to enact and implement appropriate policies and regulations to encourage local procurement, while also providing a supportive enabling environment for enterprise development and investment. Governments can require mining companies to develop and submit local procurement plans, review concessions on targeted import tariffs and duties, promote linkages and investment along the mining supply chain and allocate revenues from mining to support local supplier development.

• Mining companies need to ensure that local companies have full, fair and reasonable access to opportunities. They should share information on their procurement needs, helping to identify and assess the viability of suitable products and services for local supply, and broadening access to tenders and requests for quotation (RFQs). 

The study, supported by Kaiser Development Practice, was developed with inputs from policy makers, the private sector and civil society in workshops and consultations held last year in Accra and Guinea-Conakry.    

Contacts: 

In Cape Town: Mauricio Rios, + 44 7709 415 251, mrios@worldbank.org

In Pretoria: Sarwat Hussein, +27 73 888 1778, shussain@worldbank.org

In Washington, DC: Christopher Neal, 1 202 473 2049, cneal1@worldbank.org

To learn more about the World Bank’s Oil, Gas and Mining unit, visit:

http://www.worldbank.org/mining

Price Index 24 percent higher on average than 2010

WASHINGTON, January 31, 2012—Global food prices declined 8 percent between September and December of 2011 due to increasing supplies and uncertainty about the global economy, but still remain volatile and high with the 2011 annual index 24 percent higher than its average in 2010, according to the World Bank Group’s latest Food Price Watch.

While the first quarter of 2011 witnessed sharp increases, five consecutive months of decreases at the end of the year drove the World Bank Food Price Index 7 percent below the December 2010 levels, and 14 percent lower than its February peak. Nevertheless, global prices remain high with the 2011 annual index averaging at 210 points against 169 points average in 2010.

According to the quarterly Food Price Watch report, despite the downward trend over the last few months, global prices of key staples continued experiencing volatility, and the average annual prices of wheat, maize and rice well exceeded averages for 2010.

Domestic food prices also experienced sharp increases in many countries from December 2010 to December 2011. Wheat prices were up 88 percent in Belarus and 23 percent in Ethiopia; rice prices increased 81 percent in Uganda and 56 percent in Malawi; maize was up 117 percent in Kenya and 106 percent in Mexico; and sorghum increased 57 percent in Burkina Faso and 28 percent in Ethiopia.

“The worst food price increases may be over but we must remain vigilant,” said Otaviano Canuto, the World Bank Group’s Vice President for Poverty Reduction and Economic Management (PREM). “Prices of certain foods remain dangerously high in many countries, leaving millions of people at risk of malnutrition and hunger. Governments must step up to the plate and implement policies to help people cope.” 

Unseasonal increases in cereal prices threaten to deteriorate food insecurity conditions, especially in conflict-affected areas in Africa and across southern Somalia. In addition, the adoption of some coping mechanisms in poor homes—from eating cheaper meals to taking children out of school—could have negative, long-lasting effects on the health and well-being of millions of families in already difficult situations. Therefore, more and well-targeted support to help people cope is needed, such as school food programs, conditional cash transfers, and food-for-work programs.

Looking ahead

Prospects for decline in 2012 food prices remain favorable, due to weaker consumer demand as a result of a sluggish global economy, expected declines in the price of energy and crude oil, and strong forecasts for 2012 food supplies. 

Nevertheless some upward price pressures still remain. These include a possible increase in demand for biofuels if oil prices pick up again, very low stock-to-use levels for maize, volatility in oil prices as a result of unrest in producer countries, and weather changes. La Niña, for instance, has already made its presence felt in the Pacific Ocean and is expected to affect the growing season of maize and soybeans in Argentina and Brazil.

How the World Bank Group (WBG) is helping to put food first

• In response to drought in the Horn of Africa, the WBG is providing $1.88 billion to save lives, improve social protection, and foster economic recovery and drought resilience.

• A first-of-its-kind risk management product, provided by the International Finance Corporation (IFC), will enable up to $4 billion in protection from volatile food prices for farmers, food producers, and consumers in developing countries.

• The Global Food Crisis Response Program is helping 40 million people in 44 countries through $1.5 billion in support.

• The WBG is boosting spending on agriculture to some $6 to $8 billion a year from $4.1 billion in 2008.

• Supporting the Global Agriculture and Food Security Program (GAFSP), set up by the WBG in April 2010 at G20’s request. Seven countries and the Gates Foundation have pledged about $1.1 billion over 3 years, with $612 million received.

• The WBG is coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with NGOs.

• The WBG is supporting the Consultative Group on International Agriculture Research (CGIAR), which in 2008 – with the support of the World Bank and other donors – launched a reform process that culminated in the adoption of a strategic framework that sets out common goals, objectives, and results for the CGIAR’s new research programs, and the establishment of a multi-donor trust fund, which is administered by the World Bank. The new funding model enables the CGIAR to absorb and attract vastly more program funding, with a target annual budget of $1 billion by 2013, to which the World Bank contributes some $50 million per year. With agriculture production needing to rise by at least 70 percent to meet global food demand by 2050, and with significant time lags between the development of new agricultural technologies and their adoption by farmers, increased funding from the international community for global research is critically and urgently needed. 

Contacts: 

In Washington: Alejandra Viveros, (202) 473-4306, aviveros@worldbank.org

For Broadcast Requests: Mehreen Sheikh, (202) 458-7336, msheikh1@worldbank.org

To access Food Price Watch, please click here. 

Food Price Watch author, Jose Cuesta will take part in World Bank Live online discussion about global food prices on Thursday, February 2 at 10:00 am EST (15:00 GMT) in English and at 2:00 pm EST (19:00 GMT) in Spanish. Participate and submit questions in advance here: 

Visit us on Facebook: http://www.facebook.com/worldbank

Be updated via Twitter: http://www.twitter.com/worldbank

For our YouTube channel: http://www.youtube.com/worldbank

WASHINGTON, January 17, 2012 - The World Bank today announced the appointment of Makhtar Diop, a Senegalese national, as its new Vice President for Africa. He succeeds Obiageli "Oby" Ezekwesili who will return to Nigeria in early May after serving as the region's Vice President since 2007.

Diop, the World Bank's Country Director for Brazil since 2009, will take up his new position on May 6th.  A former Finance Minister in Senegal and Chair of the West African Monetary Union (WAEMU) Board of Finance Ministers, Diop joined the World Bank in 2001 and has served in various senior positions, including as the World Bank's Country Director for Kenya, Eritrea, and Somalia, as well as Director of Strategy and Operations in the Bank's Latin America and Caribbean region.

World Bank Group President Robert B. Zoellick praised Ezekwesili for "five years of important and successful service to the Bank and to Africa.”

"Under Oby’s leadership, our Africa team employed innovation, knowledge, partnership and financial services to strengthen results across Africa and to improve the prospects for Africa’s economic performance. Her close attention to the needs of our clients, engagement with African leadership and with regional institutions, as well as with the UN and other partners, has helped us to leverage our effectiveness across Africa.  Oby has done excellent work mobilizing private sector engagement and better connecting Africa’s development to that of other regions, particularly through South-South partnerships," said Zoellick.

The Bank President noted that Ezekwesili was a relentless campaigner for transparency and against corruption; had strongly supported the need for greater social accountability and civil society engagement; and had promoted innovative approaches to regional integration.

"We wish Oby all the best in her future endeavors working with civil society, in which she will help to strengthen public sector capacity, and work especially with young people and women.  I am especially appreciative of her committed and devoted service, including the years spent away from her family," Zoellick said.   

Contacts: 

In Washington: Aby Toure, (202) 473 8302, akonate@worldbank.org;  

For more information, please visit: www.worldbank.org/afr

Beijing, January 18, 2012 – Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.

The Bank has lowered its growth forecast for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries (-0.3 percent for the Euro Area), down from its June estimates of 6.2 and 2.7 percent (1.8 percent for the Euro Area), respectively. Global growth is now projected at 2.5 and 3.1[1] percent for 2012 and 2013, respectively.

Slower growth is already visible in weakening global trade and commodity prices. Global exports of goods and services expanded an estimated 6.6 percent in 2011 (down from 12.4 percent in 2010), and are projected to rise by only 4.7 percent in 2012. Meanwhile, global prices of energy, metals and minerals, and agricultural products are down 10, 25 and 19 percent respectively since peaks in early 2011. Declining commodity prices have contributed to an easing of headline inflation in most developing countries. Although international food prices eased in recent months, down 14 percent from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.

“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.

Developing countries have less fiscal and monetary space for remedial measures than they did in 2008/09. As a result, their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.

To prepare for that possibility, Hans Timmer, Director of Development Prospects at the World Bank, said: “Developing countries should pre-finance budget deficits, prioritize spending on social safety nets and infrastructure, and stress-test domestic banks.”

While prospects in most low-and middle-income countries remain favorable, the ripple effects of the crisis in high-income countries are being felt worldwide. Already, developing country sovereign spreads have increased 45 basis points on average and gross capital flows to developing countries plunged to $170 billion in the second half of 2011, compared with $309 billion received during the same period in 2010.

“An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09” said Andrew Burns, Manager of Global Macroeconomics and lead author of the report. “The importance of contingency planning cannot be stressed enough.”

The full report and accompanying datasets are available at www.worldbank.org/globaloutlook 

Contacts

In Washington: Merrell Tuck-Primdahl +1 (202) 473-9516, +1 (202) 476-9897, mtuckprimdahl@worldbank.org;

Indira Chand +1 (202) 458-0434, ichand@worldbank.org

In Beijing: Li Li +86 (10) 5861 7850, lli2@worldbank.org

For TV/Broadcast: Mehreen A. Sheikh +1 (202) 458-7336, msheikh1@worldbank.org 

While the East Asia and Pacific region recovered quickly from the March 2011 Tohoku disaster in Japan, flooding in Thailand and the turmoil in Europe, have started to affect regional growth. After expanding by 9.7 percent in 2010, regional GDP grew an estimated 8.2 percent in 2011, but growth is projected to ease to 7.8 percent for both 2012 and 2013. In China, which accounts for about 80 percent of regional GDP, growth eased from 10.4 percent in 2010 to an estimated 9.1 percent in 2011 and is expected to dip to 8.4 percent in 2012 as authorities continue to dampen “overly-fast” growth in particular segments of the economy.

GDP growth in Europe and Central Asia increased marginally from 2010 outturns to 5.3 percent in 2011, despite the global financial turmoil since August 2011 and weakening external demand, especially from the Euro Area. However, the expected slowdown in high-income Europe, still troublesome inflationary pressures in the region, and reduced capital flows due to the Euro Area crisis may slow regional growth to 3.2 percent in 2012, before firming to 4.0 percent by 2013. Close trade and financial ties to high-income Europe will make regional outturns particularly sensitive to developments in the Euro Area.

Latin America and Caribbean grew by an estimated 4.2 percent in 2011, but this is expected to ease to 3.6 percent growth in 2012, before picking up to 4.2 percent in 2013. Weaker global growth, uncertainty arising from the Euro Area debt crisis, slower growth in China, and a policy-induced deceleration in domestic demand are weighing on growth prospects. Brazil’s economic growth came to a halt in the third quarter and growth is forecast to be 3.4 percent in 2012, up slightly on 2011 but well below the 2010 growth of 7.5 percent. Several countries in the region could be hard hit, if international commodity prices were to weaken sharply.

Dramatic political changes in the Middle East and North Africa have disrupted economic activity substantially, but selectively, across the region, while a deteriorating external environment is beginning to amplify adverse effects on trade, commodity prices, tourism and other revenues. Developing oil exporters and the high-income GCC economies benefitted substantially from the rise in oil prices but they remain vulnerable to a sudden fall in these prices. GDP for the developing countries of the region grew by an estimated 1.7 percent in 2011 and is expected to remain subdued in 2012 (2.3 percent), rising to an expected 3.2 percent gain by 2013.

GDP in South Asia slowed to an estimated 6.6 percent in calendar year 2011, from 9.1 percent in 2010, reflecting a sharp slowdown in the second half of the year in India as well as external headwinds. Exports are negatively affected by weaker foreign demand and remittances have grown only modestly. Domestic demand is down sharply due to rising borrowing costs, high input prices, worries over the global slump, and delay in reforms. The region’s GDP growth is projected to ease further to 5.8 percent in 2012, before strengthening to 7.1 percent in 2013. High inflation and fiscal deficits remain concerns going forward.

Growth in Sub-Saharan Africa remained robust in 2011 at 4.9 percent. Excluding South Africa, which accounts for over a third of the region’s GDP, growth in the rest of the region was even stronger at 5.9 percent in 2011, making it one of the fastest growing developing regions. Increased investment flows, rising consumer spending, and the coming on stream of new mineral exports in a number of countries should accelerate Sub-Saharan Africa’s growth to 5.3 percent in 2012 and 5.6 percent in 2013. Nonetheless, merchandise exports, tourism receipts, commodity prices, foreign direct investment and remittances are all susceptible to a Euro Area recession. 

WASHINGTON, January 24, 2012 - The World Bank Board of Executive Directors today approved Program-for-Results (PforR), an innovative new financing instrument for the World Bank’s client countries that links the disbursement of funds directly to the delivery of defined results. Money will flow once the results have been delivered and verified.

PforR would support government programs in a diverse range of countries and sectors. In some countries, PforR would help deliver and improve the coverage of antenatal care for mothers and newborns or increase immunization coverage for children. In others, PforR would help provide sustainable water supply and sanitation services; strengthen the coverage and quality of early childhood and primary education; or contribute to a government program to reduce the number of rural households living below the poverty line.

“Enhancing development effectiveness by helping developing countries achieve results is central to the mission of World Bank,” said Robert B. Zoellick, President of the World Bank Group. “Program-for-Results financing demands greater accountability from partner countries and in turn will help these countries continue to deliver sustainable results long after the Bank’s involvement has ended. The time is right for this innovative development approach.”

PforR will also help improve the transparency and accountability of developing country programs, and strengthen systems to fight fraud and corruption. Under the new instrument, the Bank will provide part of the overall funding for a larger, developing country-financed program but will be able to provide its technical expertise to the larger government program. For example, the Bank’s commitment to openness and transparency will be applied to the entire program supported – including through the application of the Bank’s Access to Information policy to PforR operations.

Key assessments – fiduciary, environmental & social - of program systems are an important feature of this new instrument and will help provide assurance that Bank financing is used appropriately and that the environmental and social impacts of the program are adequately addressed. These assessments will all be publically disclosed. 

PforR financing will also help partner countries improve the design and implementation of their development programs, strengthen institutions, and build capacity.

Says Joachim von Amsberg, World Bank Vice President for Operations Policy and Country Services, "Building effective and accountable institutions in partner countries is key to achieving better development outcomes and results. We believe that with this new instrument, the World Bank jointly with others – government, development partners, civil society, the private sector and others - will be a better partner focused on results, focused on institution building and focused on better partnerships."

Feedback from an extensive global consultations process, held in two phases over the last twelve months, in 34 client countries and seven donor countries with a broad range of stakeholders, including government officials, development partners, civil society organizations, the private sector, and academics has informed the design of PforR.

Contacts:

In Washington: Geetanjali S. Chopra, (202) 473-0243, Gchopra@worldbank.org;

For Broadcast Requests: Natalia Cieslik, (202) 458-9369, ncieslik@worldbank.org

Visit us on Facebook: http://www.facebook.com/worldbank

Be updated via Twitter: http://www.twitter.com/worldbank

For our YouTube channel: http://www.youtube.com/worldbank

The project MU-Manufacturing and Servs Dev and Compet has changed to Closed. To see more information, see the project information in the World Bank project database