In the second part of an exclusive with Africa Oil & Power, United Nations Conference on Trade and Development’s Director for Africa, Paul Akiwumi, discusses trade facilitation reforms, debt relief programs and Official Development Assistance as instruments of aid for Angola during COVID-19.
What role will trade facilitation and policy reforms play in helping reduce Angola’s dependence on fuel exports?
Angola is rich in natural resources and has many other products beyond oil to offer to consumers across the world. Unfortunately, the country has one of the lowest productive capacities and weak structural economic transformations in sub-Saharan Africa (SSA). Fostering productive capacities for transformational development requires holistic, coherent and multi-sectoral approaches to development. Such an approach encompasses having effective and accessible energy, developing modern transport infrastructure, use of ICT’s infrastructure for business as well as vibrant and vitalized institutions.
Although critically important for the development prospect of Angola, trade facilitation and transport logistics should not be viewed in isolation, but as an integral part of the aforementioned holistic approach. One reason why local businesses struggle to develop and export products is due to the slow and costly import and export procedures. Compared to SSA averages, export procedures in Angola cost companies more, in money and lost time. Angola also has the highest number of power blackouts in SSA, with detrimental impact on export competitiveness of firms and industries.
As such, improving trade facilitation, as well as enhanced access to electricity and energy-related policy reforms, will release the constraints on Angolan enterprises. Furthermore, other trade facilitation mechanisms such as automating customs procedures, simplifying and standardizing trade procedures and the creation of a single window, can significantly improve the sustainability of Angolan businesses.
Trade facilitation measures related to export and import procedures are addressed in the WTO’s Trade Facilitation Agreement, which Angola ratified in April 2019. When exporting becomes more cost effective, a higher number of companies, including small and medium-sized enterprises will have the opportunity to export their products. To make such exports cost effective, enhanced trade facilitation methods, including updating agricultural methods and practices, addressing deficiencies in transport and storage infrastructure and business management skills must all be duly addressed. In sum, Angola needs trade facilitation reforms to efficiently diversify its exports and reduce its dependence on oil and vulnerability to external shocks. The Program is actively and successfully assisting Angola in implementing all the above trade facilitation measures.
How critical is intergovernmental cooperation to creating long-term, sustainable and diversified development?
Intergovernmental cooperation is key in creating long-term, sustainable and diversified development. The Train for Trade II Program for Angola is a tripartite partnership that extends to a global partnership to benefit Angola’s socio-economic development. In this partnership, UNCTAD is providing its highly valued technical expertise to help Angola move on a path of economic diversification and sustainable growth. This is made possible through information sharing and funding by the European Union as well as constant dialogue with the beneficiary country.
One of UNCTAD’s value added capabilities is its ability to build from its innovative analysis and long-standing technical cooperation experience with many other developing countries, thanks to its role as an intergovernmental body. In return, Angola’s economic diversification and reform experience, along with its strategy to graduate with momentum from the Least Developed Country status, will enrich the operational and analytical work for the other least developed countries. This Program is working. We already see signs of this through the numerous requests accruing to UNCTAD from other developing countries to benefit from the same ‘Angola-style’ holistic support program.
What can be, and should be, the role of both governmental bodies and financial development institutions in combatting COVID-19 in emerging markets such as Angola?
As the COVID-19 pandemic is impacting all countries in the world, we all need to be cognizant of the fact that those likely to be hit the hardest are those with weak health systems and highly commodity-dependent economies, such as Angola. According to a recent Brookings research study, Angola’s expected growth rate this year is likely to fall by 5%-10%. It is vital that the government speeds up export diversification policies to avoid being caught in similar situations in the future. When economic activity is close to being fully halted, it is the role of the international community – including through Official Development Assistance– and financial development institutions to inject the required support to avoid a global depression.
The first priority in such a health crisis is to address the immediate concerns. UNCTAD’s Secretary General, Mukhisa Kituyi, has already spoken about the need for a health marshal plan for Africa. This will need to be funded both through national public resources, as well as comprehensive donor support. This requires a coordinated global response to address these immediate financing needs.
Furthermore, food security could worryingly become an issue for countries, such as Angola, whose food imports constitute about 20% of all its merchandise imports. Given the current circumstances, major food exporting countries need to respect their commitments under the rules of the WTO to ensure the free flow of food products and refrain from imposing export bans and other trade distorting measures that can hamper the availability of food imports in vulnerable food-importing countries. Such a mechanism is best coordinated through intergovernmental bodies at a global level. As part of this effort, in case of short-term difficulties in financing normal levels of commercial imports, international financial institutions may come to help.
As the response to the current pandemic requires financing to cover for the immediate health-related measures, intergovernmental bodies and international financial institutions should facilitate a coordinated response, with a view to achieving the permanent cancellation of the totality or a share of the countries’ external debt. The temporary moratorium on debt service payments until the end of the year, as agreed at the International Monetary Fund (IMF) and World Bank Spring meeting, will not be enough. Urgent debt relief programs are needed to avoid the economic collapse of the most vulnerable countries.
Furthermore, ODA remains a vital source of external financing for the poorest of developing countries. While Angola is on its way to graduate from the LDC status, the many challenges it faces in the social and economic front remain. The international community has now the possibility to align the responses to the COVID-19 shock in such a way as to reorient the world economy towards a more caring, inclusive and financially stable path.
The announcement of IMF to provide $50 billion to mitigate the effects of the crisis, taking the form of grants for the most vulnerable countries and zero interest loans for others, is the way forward. Central banks and regional development banks, such as the African Development Bank, should do ‘whatever it takes’ in the face of COVID-19, including directing credit for production and employment creation, reinforcing public infrastructure and development banks, providing tailored credit lines for financially distressed small- and medium-sized enterprises. At the international level, multilateral institutions like the IMF should offer concrete low-cost hedging mechanisms for developing countries to manage exchange-rate risks coming from international shocks, averting the boom-bust financial cycles of recent decades and putting the global economy on a sustainable path.
What is the UNCTAD’s outlook for Angola post-COVID?
COVID-19 has created a social emergency in Angola. This situation calls for intensified efforts to continue providing technical support to the diversification of the Angolan economy. During the state of emergency and the possible restrictions that may continue in the near future, UNCTAD is ready to take up the challenge and is already finding innovative ways of delivering its support. As such, capacity building will be provided through webinars and other online-based solutions, refresher courses are offered remotely and advisory services in the form of on-the-job training are being provided in a virtual format. These efforts will ensure that no precious time is lost until the next face-to-face training activity can take place, and concrete advances can be made in terms of moving towards changes in policies and practices with the Angolan government and private sector entities taking the lead.