Regional integration key to Africa’s future competitiveness

By Daniel Hunter

The strides made by African economies in achieving economic growth must be accompanied by efforts to boost long-term competitiveness if the continent is to ensure sustainable improvements in living standards finds a new report, the Africa Competitiveness Report 2013.

The report, themed Connecting Africa’s Markets in a Sustainable Way, is jointly produced by the African Development Bank, the World Bank and the World Economic Forum. Regional integration is a key vehicle for helping Africa to raise competitiveness, diversify its economic base and create enough jobs for its young, fast-urbanizing population. The report maps out the key policy challenges in establishing closer regional integration:

- Closing the competitiveness gap: Africa’s competitiveness as a whole trails other emerging regions – especially in quality of institutions, infrastructure, macroeconomic policies, education and technological adoption – while big gaps persist between its highest and lowest ranked economies. The report assesses Africa’s success in creating the social and environmental factors that are necessary to address or mediate these gaps.

- Facilitating trade: Africa’s exports remain too heavily focused on commodities and its share of world trade remains low, despite numerous regional economic communities and domestic market liberalization. Intra-African trade is particularly limited. The report identifies cumbersome and non-transparent border administration, particularly import-export procedure, the limited use of information communication technologies (ICT) and persistent infrastructure deficit as major barriers to higher levels of regional integration. It also shows that these challenges are particularly pronounced for Africa’s landlocked economies.

- Building better infrastructure: Africa’s infrastructure deficit presents a serious impediment to regional integration, a problem that is made more pronounced by growth in consumer markets and urbanization. Developing adequate and efficient infrastructure will assist African economies to increase productivity in manufacturing and service delivery, contribute to improvements in health and education and help deliver more equitable distribution of national wealth. The report examines how developments in energy, transportation and ICT can be deployed to maximize the benefits of regional integration.

- Investing in growth poles: Defined as multi-year, generally public-private investments aimed at accelerating export facing-industries and their supporting infrastructure, growth poles represent important ways of building productive capacity and boosting regional integration through the attraction of investment. As the World Bank has invested in growth poles for a number of years, the report looks at how best practice can be deployed to deliver further benefits across the continent.

“Africa’s growth needs to be seen in the wider international context, where encouraging gains in economic growth belie an underlying weakness in its long-term competitiveness. Regional integration is key to addressing this weakness through the delivery of wider social and economic benefits and should be prioritized by Africa’s leaders as they look to ensure that Africa delivers on its promise,” said Jennifer Blanke, Chief Economist, World Economic Forum.
Source: internationaltrade.co.uk

British companies look to emerging markets for growth

By Daniel Hunter

Asia has over-taken the European Union as the market in which exporters expect to see the most growth over the next five years, new research from the Institute of Directors (IoD) and the All Party Parliamentary Group on Trade and Investment reveals.

The report, launched yesterday (Tuesday) in the Houses of Parliament, also shows that Asia has moved ahead of North America as a destination for UK exports.

The report presents the findings of a Policy Voice poll of 1,162 IoD members which ran from Wednesday 14th November until Friday 23rd November 2012.

Key Findings

EU is still the top destination for exports…

The European Union remains the market in which most IoD members are active. However, the percentage of IoD members trading in the EU is falling (from 84% to 82% between 2010 and 2012), whereas the percentage in Asia is on the rise (from 39% to 47%). The EU was the only market to see a decrease in activity, with strong growth in the Middle East in particular (38% in 2010 to 44% in 2012). For the first time, IoD members are more likely to trade in emerging Asian markets than with the mature markets of North America (47% to 46%).

…but businesses expect faster growth elsewhere

Asked which markets they expected to deliver export growth over the next five years, Asia came out top, with 50% of IoD exporters optimistic about their prospects there. Compared with two years ago, members are far more pessimistic about future trade with Europe. Only 43% anticipate their export activity to grow in the EU over the next five years, a fall from 58% in 2010.

Exporting remains difficult for small businesses

In order to reduce our trade deficit, more businesses must be encouraged to export. The survey reveals that 57% of IoD members export, considerably higher than the national figure of 31%, indicating that there is scope for more UK companies to begin exporting. Half of members gain less than a third of their turnover from exports, showing that there is also significant potential for expansion by existing exporters.

However, the risks associated with exporting still put off small companies. 35% of businesses said their organisation was just too small to export. Worryingly, 72% of companies which had never exported said they had no plans to do so.

Commenting on the research, Alexander Ehmann, Head of Enterprise Policy at the IoD and author of the report, said: “Given the on-going troubles in Europe, it is perhaps not surprising that exporters are looking to emerging markets for growth. Expansion into new markets is critical if the UK is to address its truly alarming trade deficit. Policy-making should focus first on encouraging those firms for which export activity is only a small part of their business to expand to greater levels.”

Margot James MP, Chair of the APPG on Trade and Investment, said: “I’m delighted that the APPG and the IoD are able to contribute to the debate around Britain’s international trade activity and pleased by the positive conclusions in this report. Growing exports is fundamental to the success of the government strategy of re-balancing the economy, and it is our job to help remove the barriers facing exporters whilst also working to encourage more of our world class British businesses to take their products and services abroad.”

|International Trade News|

European Leaders’ Softening on Austerity May Accelerate

By Patrick Donahue

Europe may accelerate a shift away from its austerity-first agenda this week as the new Italian government changes course and a German-Spanish investment pact underscores a renewed focus on combating record unemployment.

Yesterday’s swearing in of Italian Prime Minister Enrico Letta ends a political deadlock nine weeks after voters rejected the country’s budget-cutting course. German Finance Minister Wolfgang Schaeuble, a champion of austerity, will travel to Spain today to unveil a plan aimed at spurring investment in Spanish companies. Later this week, the European Central Bank may also cut interest rate at a meeting.

 

“You have to react to economic developments -- we do so in Germany,” Schaeuble told members of Chancellor Angela Merkel’s Christian Democratic Union in Berlin last week. “We are not bureaucratic; we are not stupid.”

The new Italian government’s pledges to dismantle parts of the budget-cutting project undertaken by ousted premier Mario Monti open a new front in the debate over the German-led policy of austerity to overcome the bloc’s debt crisis. As the 17- member euro area remains mired in recession, European leaders are joining global critics in urging the bloc to devote more resources to boosting economic growth.

 

Italian bonds strengthened for a fourth week last week, with 10-year yields dropping below 4 percent for the first time in almost 2 1/2 years. As the two-month political gridlock ended, speculation also about the ECB’s possible rate cut.

|Bloomberg| Fragment

 

 

 

How foreign companies evaluate the Russian market

A clear verdict – falling both positively and negatively – is how member businesses of the Committee on Eastern European Economic Relations and the German-Russian Chamber of Commerce (AHK) evaluate the business climate in Russia in 2013 according to a recent survey. International Trade News lays out the arguments on both sides

ADVANTAGES:

 

Securing growth and profit
The companies surveyed see opportunities for growth and profit as the greatest advantage of the Russian market. They are followed by the market’s great consumer demand, and in third place, its perceived low tax burden.

Where the action is: the energy, automobile and construction industries
The energy market – including electricity, oil and gas – is an unchallenged market primed for the future. Industry leaders also expect strong chances for growth in the coming years in the automobile industry and in construction.

Business situation looking slightly up
Compared with 2011/2012 figures, the business situation is improving for many survey respondents. Roughly 13% describe their situation for 2012 as being ‘very good.’ Just a year before, only 10% evaluated it in such a way. At mere 3% (in 2011, 9%) said their situation was ‘bad.’

Hungry for investment
The survey’s respondents want to invest in new employees and facilities. Almost two thirds (65%) plan new hires. Roughly half (49%) are pursuing con-crete investment plans, which they estimate at about 800 million EUR. Since just a third of businesses provided concrete sums, the total amount being invested is assumed to be in the billions.

Russia’s joning into the World Trade Organization shaking up business
Over three fourth of respondents expect Russia’s joining into the World Trade Organization to invigorate Russia’s business climate in 2013.

Top locations Moscow and St. Petersburg
A ranking of Russian business locations with the best investment climates: Moscow, St. Petersburg, Tatarstan, Krasnodar (in the Olympics region) and Nizhnij Nowgorod.
                                          
DISAVANTAGES:

The industrial ‘Mittelstand’ does not exist in Russia
Russia’s midsize businesses are still not a motor for industrialization, which also has negative consequences for foreign businesses. An estimated three fourths of all medium-sized Russian firms are considered part of the service industry or come from trade.

Supply structures are weak
German investors complain about the lack of supply structures for midsize firms in Russia.

Acute lack of skilled professionals
Russian businesses and foreign investors alike are suffering from an acute lack of highly specialized skilled professionals – especially outside of metropolitan areas.

Exasperating bureaucracy
Bureaucratic structures can create time-wasting barriers to investment projects. One example here is the very long process to obtain permits.

Corruption
Businesses see bureaucratic hurdles as the second greatest hindrance to investment. On the Corruption Perception Index of 2012, put together by Transparency International, Russia is far down the list – at 133rd place.

|International trade news|