Trade isn’t all about tariffs or taxes, as COVID-19 has shown.
From fresh produce to toilet paper to bicycles, the pandemic has disrupted the complex supply networks that crisscross the globe. And with...
The Goods Trade Barometer’s current reading of 100.7 marks a dramatic improvement from the 84.5 recorded last August, which reflected collapsing trade and output in the second quarter as lockdowns and travel restrictions were employed to fight the virus. The latest reading indicates a strong rebound in trade in the third quarter as lockdowns were eased, but growth is likely to slow in the fourth quarter as pent-up demand is exhausted and inventory restocking is completed.
Trade-related uncertainty remains high. A second wave of COVID-19 infection is already under way in Europe and North America, leading to renewed lockdowns that could trigger another round of business closures and financial distress. On a more positive note, progress has been reported in the development of a vaccine, but when and how it might be deployed is not yet known.
The Goods Trade Barometer is designed to gauge momentum and identify turning points in world trade growth in real time. Readings of 100 indicate expansion in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.
All of the barometer’s component indices were rising in the latest months, with some climbing above their medium-run trends while others remained depressed. The recovery in the overall barometer index was driven by export orders (113.5) and agricultural raw materials (103.6), both of which finished firmly above trend. The indices for container shipping (102.0) and automotive products (94.6) also recovered substantially to near trend, while those for air freight (88.5) and electronic components (94.6) remained below trend.
The latest reading of the Goods Trade Barometer is consistent with the WTO’s revised trade forecast of 6 October 2020, which predicted a 9.2% decline in the volume of world merchandise trade in 2020. This outcome would require a sharp rebound in the third quarter following the 17.2% year-on-year decline registered in the second quarter.
Normally the Goods Trade Barometer anticipates turning points in world trade by a few months, but new sources of uncertainty related to the COVID-19 pandemic may have reduced the predictive value of its component indices. Under these circumstances, higher-frequency (i.e. daily or weekly) statistics may provide additional signals of economic activity and trade to complement the standard set of indicators. These indicators point to a stalled recovery of international flights and container shipping in October, but improved economic sentiment as reflected by copper futures and press reports (see below).
The full Goods Trade Barometer is available here.
Further details on the methodology are contained in the technical note here.
The trade barometers provide a preview of trends in WTO trade statistics, which can be downloaded at data.wto.org. Forthcoming releases include merchandise and commercial services trade values on 27 November and merchandise trade volumes in mid-December.
From fresh produce to toilet paper to bicycles, the pandemic has disrupted the complex supply networks that crisscross the globe. And with that disruption, the virus has revealed the delicacy of many of these links, and how tenuous the world’s worst-off are within these global arrangements.
Garment factories in Bangladesh, Myanmar, and Cambodia have all experienced cancellations of orders. In total, U.S. and European fashion companies have refused to pay overseas suppliers over $16 billion in global goods, affecting millions of workers.
For lower-income countries that rely heavily on tourism, a similar story unfolded. Pandemic lockdowns started, cancellations ensued, and the many that work in parks, safaris, and heritage sites — often in more remote areas with few employment prospects — lost jobs and essential income.
Of course, COVID-19 is a disaster of massive proportions, with most if not all people and institutions diminished in one way or another. Should we expect that global value chains, or GVCs, which have driven international trade and spurred economic development in some low-income countries, be more resilient?
For the world’s lowest-income nations, becoming a link in a global “chain” of production can help to boost economies. But for businesses in these countries, there are hurdles to overcome from customs and transportation to infrastructure and certification requirements. But, following that, there is promise.
The country is under pressure to introduce compulsory regulations.
According to the World Bank’s “World Development Report 2020,” a 1% increase in GVC participation boosts per capita income by over 1%. But, the report notes that GVCs are at a “crossroads,” with growth leveled off since 2008 with GVCs at 52% of trade.
Take Bangladesh, the country doubled its world market share of exports between 1995 and 2012, with much of the growth attributed to its garments industry being integrated into GVCs. Key to the country’s success were government incentives, flexible labor arrangements, and very little taxation. Yet during the pandemic, according to the Center for Global Workers Rights, over 1 million workers have been fired as a result of canceled orders and buyers’ refusal to pay.
Can GVCs be re-centered so the world’s worst-off in countries like Bangladesh aren’t the first to bear the brunt of shocks?
The services sector of GVCs is linked with the highest gross domestic product growth. Job gains in this sector are offsetting losses in manufacturing. Countries have responded, by, for instance working to develop tourism industries or IT sectors. For years, Cabo Verde had been positioning itself as an island idyll, now it is at a crossroads amid the pandemic-induced global travel restrictions. What did the country do? It’s paying idle workers in the tourism sector 70% of their income until the end of this year.
With the exponential development of the global need for now-digital connectivity, there is space for low- and middle-income countries to spearhead new models for themselves, while maintaining efforts that have had success.
In Myanmar, the government swiftly responded to the increased need for digital commerce. In Tanzania, the tourist board and wildlife conservation authorities live-streamed the great wildebeest migration. In Samoa, Women In Business Development used the Maua app, the country’s first e-commerce platform, to create an online market where farmers and small businesses have been selling their products during lockdowns.
Setting aside the integral roles of importers, industry, donors, and multilaterals, what can low-income countries do themselves to work toward some control?
1. Understand strengths and weaknesses
Countries need to take advantage of strengths and build resilience against shocks. Ethiopia’s coffee sector is using its close ties with diverse coffee markets in the EU, the U.K., and Saudi Arabia to weather the global coffee crisis. Schemes that guarantee a minimum price for farmers and coffee producers, or salaries for garment workers and tourist guides, are more important now than ever.
2. Improve the business climate
With strong and transparent institutions, countries can better navigate the complex dynamics of GVCs, and hopefully dictate their own terms. Governments could review their foreign direct investment strategies by looking at the exporting sectors that have been attracting investment. Rwanda is now providing a preferential tax rate for investors that undertake to work with a host of different energy sources to position the country’s investments beyond the pandemic.
3. Reduce trade and investment barriers
Complex customs rules, regulations against foreign companies, export restraints — countries can address these so they’re not at a disadvantage from the start. Initiatives such as the Enhanced Integrated Framework at the World Trade Organization have been working with countries to assess the barriers and work to put improvements into action.
4. Build digital capabilities
The internet was already facilitating GVCs, but many countries will still need to overcome their many challenges of infrastructure, of skills, of systems, of policy.
With trade, no country can work in a silo. EIF has been leading a #PowerUpTrade campaign together with the lowest-income countries, highlighting how people who work along value chains are being impacted by COVID-19.
The pandemic is showing us that the poorest countries continue to be the most vulnerable, and while they can do a lot on their own, they also can’t do it alone.
From fresh produce to toilet paper to bicycles, the pandemic has disrupted the complex supply networks that crisscross the globe. And with...
KIW2020, last year’s edition of the annual KIW, was like no other. Owing to the COVID-19 pandemic, KIW2020 was organized as a hybrid event that involved in person participation of over 150 attendees with more than 5,000 others joining online from Uganda, Sudan, Kenya and the UAE, among other countries.
It goes without saying that the COVID-19 pandemic brought unprecedented challenges across many facets of life and business, and particularly disrupted many startups especially in economies like Uganda. Consequently, the KIW2020 edition was aptly themed around recovery and resilience for Startups and SMEs, where innovators, entrepreneurs, investors and development partners from all around the region gathered for discussions amid the ongoing global health crisis.
Discussions were focused on fostering the resilience and recovery of the Ugandan entrepreneur, financing Uganda’s green economy through entrepreneurial solutions, and rethinking the approach to startup financing.
Each day, a major partner event was hosted, with Day 1 dedicated to ITCs pitch competition which reached over 1000 people online. Activities were hosted by the Uganda Green Enterprise Finance Accelerator (UGEFA) on Day 2 around green entrepreneurship in Uganda and the various opportunities for finance. Enabel hosted a boot camp on Day 3 around digital innovation for entrepreneurs in the context of COVID-19.
Some of the speakers included Iyinoluwa Aboyeji, co-founder of Andela, Flutterwave and Future Africa, Norhizam Abdul Kadir, Vice-President of Fintech and Islamic Digital Economy at Malaysia Digital Economy Corporation, and renowned investor and entrepreneur Tomi Davies, President of the African Business Angel Network.
One notable showcase of this edition was the resilience of the startups that weathered the storm as the world quaked under a global pandemic. Indeed, the ingenious innovations that soared above the pandemic demonstrated the power of startups to swiftly devise solutions for contemporary issues and global challenges.
Below are three main highlights of the discussions at the KIW2020
Entrepreneurs embrace innovation during the pandemic
Julian Omalla had a dream of starting a fresh juice business. With UNCDF support, she started Delight Uganda Limited, a successful fresh juice business that sources its raw materials from farmers in Nwoya district.
When the pandemic hit, Omalla had to lay off her workers and close the business whose main customers were students in boarding schools. She used the lockdown period to re-strategize, reorganize and grow more fruits through the Nwoya Fruit Farmers’ Association that consists of over 5,000 farmers. This is one of the stories of resilience amid a global pandemic that was showcased during KIW2020.
Despite the apparent market uncertainty, many startups, companies and individuals have risen to the occasion, shifting their working models and using innovative digital solutions to meet customers’ needs. A number of startups are providing solutions in financial services, health, education, e-commerce, and entertainment, among other sectors.
Companies like Tubayo Travel and Pro Interns, both of which depended heavily on in person communication and freedom of movement for their business modules, discussed the ways in which COVID-19 forced them to adapt and adopt new ways of working in order to survive.
Here is a recap of the discussion.
Panelists discuss the need for a Startup Act
Startups are universally recognized as a vital engine that powers rapid economic growth. In Uganda, despite the numerous laws and policies that guide companies, panelists at the KIW2020 observed that there is need for a specific Startup Act that not only defines what a startup is but also stipulates specific benefits to startups such as access to tax relief and how the government can support them to access international markets.
“Many businesses are collapsing because of the lack of law protection,” said John Walugembe, CEO at Federation of SMEs. “Startups need to be recognized for their contribution to the economy, not as a favour to them.”
Though the panelists agreed that there is need for more groundwork and research before a Startup Act can be enacted, a clarion call was made for an urgent legal framework within which startups can be engaged. They added that the framework should provide for more lenient requirements for registration, mechanisms for access to finance, and an enabling environment for entry and exit into the sector.
Digital innovation to improve efficiency in the humanitarian sector
There is no doubt that the pandemic has hit hardest the people who are traditionally marginalized, affecting their ability to access social services like health and education. Consequently, the humanitarian sector needs to embrace digital innovation to build solutions that improve the lives and livelihoods of the most vulnerable.
The discussion emphasized the concern that digital solutions should make the lives of people supported by humanitarian organizations better, not worse. Governments and regulating authorities play a leading role in accommodating the innovation process and ensuring consumer protection.
“We need to ensure that our solutions do not for instance propagate domestic violence or create more division amongst communities,” observed Jaki Mebur Market Engagement Manager, GSMA.
Keeping in mind the limited access to technology and digital literacy that marginalized communities face, digital innovations should address the needs of the most vulnerable.
Please visit the Kampala Innovation week Facebook page to watch all the live stream sessions.
KIW2020, last year’s edition of the annual...
The World Travel and Tourism Council predicted in November 2020 that 174 million people could lose their travel-related jobs that year alone due to the COVID-19 pandemic. To re-boot the global economy and re-connect society physically and virtually in a new reality, people will need to engage physically and digitally with public authorities and businesses.
But the potential is bigger: the possibility to safely claim who we are will impact how we live and how fast the world economy can recover – alleviating key risks highlighted in World Economic Forum’s COVID-19 Risk Outlooks Report.
Human-centric digital identities are an enabler to alleviate the global risks of health, movement, travel and trade highlighted in the COVID-19 Risks Outlook, May 2020.
The need for trust
The advantages of trusted claims are multiple from binding health tests to an individual being able to enter venues or travel, to relying upon education and work certificates issued remotely, to remotely signing property contracts. But with contact tracing, self-declaration or health credential approaches facing scrutiny – how to enable the new normal?
People are worried about the impact of technology on their personal data management (66% of people lack trust in data based on the Edelman Trust Barometer), but there is one fundamental digital infrastructure layer that can bring transparency to interactions: digital identity.
Human-centric digital identities: an enabler to rebuild economy and trust
Human-centric, digital identity lets people know who they are dealing with without revealing more than the strictly necessary information. Digital identities give the user control of their data – they provide clear audit trails and streamline how businesses and governments allow people to register and access their services and trade. It has great potential for online education, issuing employment credentials, fighting fraud or proving one’s health status. Digital identity was often confined to the technology community or banking’s Know Your Customer checks and to combat money laundering.
With our digital footprint extending into all walks of life, digital identification is becoming a global topic. A healthy digital identity network widens civic participation and supports societal advancement, a case in point would be the Estonian digital identity approach, which allows the nation’s public and private sector e-service information systems to link up and function in harmony.
Digital identities are widely accepted
While government’s role is key, regulators have understood that they don’t hold all the cards and that solutions are needed across the public and private sectors. Digital identity trust frameworks led by governments working with the private sector are emerging – defining claims for people and organizations that should be broadly recognized.
Such frameworks have emerged in Canada, the EU, the Smart Africa Alliance, Australia and New Zealand, and in vertical market sectors from health and employment to travel, encompassing data responsibility, cyber security, interoperability, inclusion, governance, redress and liability.
‘As proven in Canada, a digital ID ecosystem is not only a motor to connect people, governments and the private sector in a trusted and transparent way – but it also accelerates participation in the economy, work and mobility’
—Vidya ShankarNarayan, Assistant Deputy Minister and CIO, Agriculture and Agri-Food Canada and previously Director General, Digital Government
Human-led identity approaches avoid surveillance and mistrust
While trust models vary among regions following the eminently practical Good Digital Identity guidelines will help to open an era of transparency:
The risks of doing nothing
The cost of not pursuing digital identities is high. Being able to digitally prove claims is vital to enable paperless, contactless, streamlined processes across public and private sectors. Sadly, COVID-19 has shown many cases of fraud applications for grants from bogus organisations, selling non-genuine tests to citizens, setting up fake companies or enlisting fake directors to harvest data. In the UK alone, Policy Exchange estimates that fraud and error could cost the government between £1.3bn-£7.9bn ($1.8bn-$10.8bn) in 2020.
Next steps for governments and companies
Governments around the world are spending huge amounts to bail out economies due to the impacts of COVID-19, looking for GDP gains, streamlining economies and decreasing fraud. Digital identity enables all this, as well as robust testing regimes, opening travel and work places. The value creation of digital ID is equivalent to 3-13% of GDP by 2030, according to McKinsey.
So what needs to be done?
Only 6% of Private Finance Mobilised Through Development Finance Reached LDCs between 2012 and 2018
The third edition of the Blended Finance in the LDCs report series acknowledges that LDCs are not able to harness the full potential of blended finance, defined in the report as the strategic use of development finance to mobilise commercial finance towards the SDGs, with a focus on unlocking investment that the private sector would not have done on its own. Between 2012 and 2018, LDCs received 6% of the total global share of private finance mobilised by blended finance transactions, a total of USD 13.4 billion. This represented the lowest proportion of mobilised private finance among country categories. By comparison, lower middle-income countries received USD 68 billion, while upper-middle income countries received USD 84 billion.
Against the ever-increasing gap to finance achievement of the SDGs, much of the 13.4 billion received by the world’s 47 LDCs reached just five countries (Bangladesh, Myanmar, Angola, Senegal and Uganda). At the industry sector level, over 60% of the private finance reaching LDCs through blended finance transactions went to only three sectors—energy, banking and financial services, and mining and construction. The least-targeted areas were health, water and sanitation, education, and other social sectors.
Such finance challenges coincided with mounting pressure to respond to the COVID-19 pandemic as it brings distressing health outcomes to LDCs on top of dramatic shocks from the ensuing global economic crisis. In the medium to long term, the report states that blended finance can play a key role in supporting LDCs to mobilise resources for economic recovery. This will require immediate action to start building a pipeline of bankable projects that can attract private capital, as well as coordination among development finance actors around such efforts as capitalizing small businesses, investing in sustainable infrastructure, promoting gender equality, the transition to digital economies, and supporting health systems. In the immediate term, blended finance can play a catalytic role in the growth and strengthening of health systems in LDCs, including —potentially— the dissemination of vaccines.
“UNCDF is proud to continue its work and thought leadership on the effective use of blended finance in LDCs,” said Judith Karl, Executive Secretary of UNCDF. “As Covid-19 threatens achievement of the SDGs in the LDCs, and in the context of the Decade of Action, innovative solutions for mobilizing much-needed finance for LDCs must be brought to scale through systemic and transformational approaches. Now is the time to redouble our commitment to leave no one behind. We hope this report promotes discussion and creates more options for how blended finance can be used to increase mobilisation of financing to LDCs.”
“The evidence in this report sounds an alarm: far too little development finance is reaching those furthest behind, which risks cleaving the world down unequal lines when solidarity is needed more than ever” said Jorge Moreira da Silva, Director of the OECD Development Co-operation Directorate. “With COVID-19 already reversing development gains in LDCs, and many challenges still ahead, it is urgent that we redesign global finance to incentivise sustainable investment. Official development finance can be leveraged better to mobilise and align additional finance for the SDGs in LDCs, and tools to increase transparency and measure impact will go a long way to help scale blended finance in LDCs.”
“Malawi is very pleased to support the third edition of this report, which comes at a crucial moment when the Covid-19 pandemic has increased financing needs in LDCs, and the preparatory process for the Fifth UN Conference on LDCs has commenced,” said H.E. Perks Ligoya, Ambassador and Permanent Representative of the Republic of Malawi to the United Nations and Chair of the Global Coordination Bureau of the Least Developed Countries. “Increasing development financing available for LDCs will be critical for recovery from the Covid-19 pandemic and the achievement of the SDGs.”
In addition to presenting updated data and incisive guest contributions, the “Blended Finance in the LDCs, 2020: Supporting a Resilient Covid-19 Recovery” report includes an Action Agenda to harness the potential of blended finance for the LDCs. The Action Agenda focuses on four critical points:
Blended Finance in the Least Developed Countries 2020
The Blended Finance in the Least Developed Countries, 2020 report is the second joint UNCDF-OECD report. It builds on UNCDF research and experience, OECD data and analysis, and a series of guest contributions written by a varied range of blended finance experts.
To access the full report, go to www.uncdf.org/bfldcs
Only 6% of Private Finance Mobilised Through Development Finance Reached LDCs between 2012 and 2018