Archives For September 2013

FTW - Gauteng Edition Sept 2013The latest Freight & Trade Weekly (FTW) [Gauteng special edition] publication reminds me of a very interesting article I read a few months back – refer to my post “What are surfaces?” of 23 June 2013. The article dealt with the question of surfaces (i.e. land and sea) in relation to the multimodal movement of containers and envisioned by the logistics and supply-chain management practices.

I bewailed the fact that the actual dissertation would set me back a US$1000 but remained intrigued by the content which such dissertation would contain given the very interesting abstract I had just read. Given the high cost of such, obviously acknowledging the expertise, knowledge and resourcefulness which often goes into the preparation such papers therefore puts them beyond the reach of most.

To my amazement, a few days later I received an email from a fellow blogger – an expert in supply chain logistics – who was happy to share with me his copy of the paper.  The paper is titled “Shipping container mobilities, seamless compatibility, and the global surface of logistical integration”, published by Environment and Planning (EPA) volume 45 (2013). The author, a Dr. Craig Martin has delivered a masterpiece (my view) which considers the subject matter way beyond what I, as a Customs and Trade specialist, would consider or envision. I thoroughly enjoyed his bringing together of historical and current concepts and principles (attributed to many experts and peers) in the matter of intermodal containerisation.

Understanding the supply chain is a critical pre-requisite in the international Customs and Trade arena, at least since 9/11. In addition to the various WCO guides and standards, one needs to locate and digest papers such as this – and here I refer also to the many other websites, reference portals and publications of international experts in the global logistics and supply chain field.

Some of the more salient statements contained in the  Dr. Martin’s paper confirms that the ‘ideology of containerisation emanates out of a wider body of reasoning based on the notion of integration.’

The Need and Logic of Integration

Integration focuses on interactions between various aspects of a supply chain and is defined as “a systems approach to viewing the supply chain as a whole, and to managing the total flow of goods inventory from the supplier to the ultimate customer”.

From the late 1950s, management theory began to emphasize the importance of “how industrial company success depends on the interaction between the flows of information, materials, money, manpower, and capital equipment”.

By the 1980s, the emphasis of the logistics sector’s control of company functions, including materials management, transport, storage, and information management, highlighted the importance and process of integration.

During the mid-1990s, the notion of integration extended even further with the move towards supply chain management (SCM), where aspects of supply, materials management, distribution, and retail functions were placed under the control of a single company. The overarching ideology of logistics and SCM are systemic completeness and the management of flow.

The movement of containerised cargo is a critical component of SCM, as it accentuates surface control through the integration of land and sea transport. As far back as the 1960’s, experts opined that “most types of liquids and solids may someday be moved in sealed containers interchangeable among road, rail, air, and marine transport. Advantages would include reduction in damage and loss in the time and cost of loading and unloading. Containers may prove to be the catalyst that integrates the various components of the transport sector which are now being independently planned, financed, and operated” – and this is exactly what is happening today.

Standardisation towards Intermodal Integration

In 1953 Malcolm McLean developed the idea of transporting truck trailers on ships rather than on the congested highways of the US East Coast. His rationale was to overcome congestion by consolidating the transport system: at this time the truck and ship industries were entirely separate. He is ultimately credited for the invention of the modern cellular container we have today.

Vital to structural integration was the standardized nature of infrastructure itself – enabling the coupling of a container with a variety of nodes. These include the design of container-cell vessels, the redesign of road haulage vehicles and railway rolling stock, the design of container handling vehicles in ports, the construction of large-scale dockside gantry cranes, the design of spreader bars, and not to forget the design of the container corner fittings – these are standardized across all of the equipment related above.

It can therefore correctly be asserted that “the container links land and sea transport in an almost seamless and profoundly international continuum” (Broeze 2002)

So I guess what I’m trying to emphasize is that close on 70 years of continuous harmonization and integration in the supply chain logistics industry, specifically in regard to multimodal (door-to-door) containerized transport, as well as the substantive facilitation support accorded thereto by both the WTO and WCO, the basis of containerisation must surely be a consideration when applying regulatory control measures whether it be in the export leg or import leg of an international supply chain movement.

The key enabler in a modern Customs environment is undoubtedly automated processing and no less automated risk assessment. Facilitation on the other hand is a tool whereby, in combination with risk assessment, Customs focuses on entities and patterns rather than transnational intervention. Unreasonable (and mandatory) termination of a multimodal movement destroys the benefits of containerization and will add costs and loss of competitiveness for traders. Our beautiful country can ill-afford this given burgeoning competition from our neighbours up north. Finally, The matter of regional integration is another aspect which needs in-depth consideration. As we enthuse and wallow in our new found technological state, physical borders remain the biggest inhibitors to trade. More on this another time.

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SARS chief officer of legal and policy Kosie Louw (Picture: Robert Botha/Business Day Live)

SARS chief officer of legal and policy Kosie Louw (Picture: Robert Botha/Business Day Live)

The South African Revenue Service (SARS) has committed itself to further engagements with importers of all sizes in a bid to improve its proposals to transform the customs control regime.

Consultations have already taken place with organised business on the proposed Customs Duty Bill and the Customs Control Bill, and the process would now be taken to the level of traders to find out whether the proposals presented them with any problems. Amendments have also been proposed to the Customs and Excise Act to provide for the transition to the new system.

“We want to understand the situation at a micro level. We will sit around the table until we find a solution which will guarantee to us that we get the information we require but which will also facilitate trade.

“We do not want to clog up the ports,” SARS chief officer of legal and policy Kosie Louw said in an informal briefing on the proposals to Parliament’s standing committee on finance on Wednesday.

The customs bills are mainly concerned with improving the information about imported and exported goods so that customs officials can exercise greater control.

Business has expressed concern that the requirement of the Customs Control Bill that they submit a national in-transit declaration of goods at the first port of entry before they are sent to internal terminals, or depots such as City Deep, would cause delays.

The new declaration — of the nature, value, origin and duty payable on the goods — would replace the limited manifest used to declare goods and would include information on the tariff, value and origin of goods.

Business has argued that the manifest allowed goods to move seamlessly from the exporting country to the inland port or depot, and would change the contractual relationships between exporter and importer in terms of when duty is paid.

However, Mr Louw did not believe the provision would cause delays and had obtained legal advice that the contractual relationships and method of payment of duties would not change. The problem with manifests, he said, was that they provided very limited information and did not allow SARS to prevent the inflow of unwanted goods. Nevertheless, he said that SARS would discuss the matter with traders.

Mr Louw said the proposed system would “improve SARS’s ability to perform risk assessment and intervene in respect of potentially high risk, prohibited and restricted consignments at the ports”.

The bills have been in the pipeline for about four years and have been extensively canvassed with the Southern African Customs Union and business. They were needed, Mr Louw said, so that South Africa kept pace with global trends in trade, international conventions and advances in technology.

Anti-avoidance provisions have also been introduced into the bill which sets out the offences and associated penalties for noncompliance and attempts to avoid paying customs duties.

SARS group executive for legislative research and development Franz Tomasek said the Customs Control Bill would introduce a new advance cargo loading notice for containerised cargo to prevent the loading of prohibited or restricted goods on board vessels bound for South Africa. However, to reduce the administrative burden on carriers, information submitted in advance will no longer be required on arrival or prior to departure. Source: Business Day Live

 

waterwaysforward-wordpress-com_SnapseedThe European Commission (EC) has announced new measures to get more freight onto Europe’s rivers and canals.

It underlines that barges are amongst the most climate-friendly and energy efficient forms of transport but currently they only carry about 6% of European cargo each year.

The new proposals intend to realise the “unused potential” of Europe’s 37,000 km of inland waterways, enabling freight to move more easily and lead to further greening of the sector, as well as encouraging innovation and improving job opportunities.

“We already send 500 million tonnes of freight along our rivers and canals each year. That’s the equivalent of 25 million trucks. But it’s not enough. We need to help the waterway transport industry develop over the longer term into a high quality sector. We need to remove the bottlenecks holding it back, and to invest in the skills of its workforce,” said the EC’s Vice President, Transport, Siim Kallas.

The Commission is proposing to remove significant bottlenecks in the form of inadequately dimensioned locks, bridges or fairways and missing links such as the connection between the Seine and the Scheldt river systems which are hampering the sector’s full development potential.

In August last year, Lloyd’s Loading List reported that a multi-billion euro project, the Seine-Nord Europe (SNE) Canal, to build a 106km, 54-metre wide canal to link the Seine and Scheldt rivers by the end of the decade, had suffered a serious setback, with doubts cast over private investment in the project.

The French government continues to support the SNE Canal despite the conclusions of an audit into its financial feasibility which recommended that it be postponed indefinitely.

It commissioned the over-hauling project which could be presented to the European Commission in its new form in the first quarter of 2014, the aim being to secure greater EU funding than that granted under the initial plans.

The Commission is also proposing action to encourage investment in low emission technologies and to support research and innovation. Source: Lloyds.com

SEZ and Regional Integration in AfricaOne of the most prominent features of the global trading landscape in recent years has been the worldwide proliferation of bilateral and regional trade agreements. Africa is no exception to this pattern. Another prominent development in Africa over the last couple of decades has been the increasing use by many countries in the region of various types of special economic zones (SEZ). These zones are more and more being viewed in the region as important mechanisms for attracting foreign investment, creating jobs, boosting manufacturing production and manufactured exports and contributing to much-needed industrial and economic development.

This paper – Click here for access – does not seek to provide an evaluation of the performance of the various special economic zone programmes established in Africa in recent years, but instead seeks to explore the various issues, challenges and opportunities that arise when countries – and especially developing countries – use special economic zones while simultaneously pursuing regional integration initiatives. This is a particularly important subject in the context of the COMESA-EAC-SADC T-FTA as a large number of the countries involved are actively using special economic zones or are currently in the process of establishing zone programmes. Source: Tralac

Another Tralac sponsored publication which should be of great interest to trade practitioners, economists and investors, and agricultural specialists. Herewith the foreword to the ebook which is available for download from Tralac’s website – Click here!

The accession of South Africa into the BRICS formation has attracted a lot of attention internationally. Some welcomed the step while others questioned it. A closer look at BRICS reveals that these countries share some fundamental features while they differ in others. On that note, this book does not attempt to define BRICS.

BRICS-front-cover-webBRIC, the acronym, was coined by Jim O’Neill of Goldman Sachs in 2001. The founding members of this political formation are Brazil, Russia, India and China, aligning well with the word formulation. The formation of the BRIC was motivated by global economic developments and change in the geopolitical configurations. South Africa joined the group in 2011, thus opening the possibility of putting Africa on the BRICS’ agenda. South Africa’s admission to the group was motivated by China and supported by Russia. Its accession to the BRICS generated much discussion about the country’s suitability to be part of the formation. One of the real issues raised is that South Africa does not measure up to the other BRIC economies in terms of population, trade levels and performance, and growth rates. A formation such as the BRICS is of value to South Africa only if the country’s strategic development interests (relating, for example, to agriculture) are to be on the agenda. South Africa faces particular challenges related to market access into the BRIC countries.

Agricultural issues are discussed under the Standing Expert Working Group on Agriculture and Agrarian Development. The issues that are prioritised include:

  • The development of a general strategy for access to food (this is where market access needs to be tabled), which is tasked to Brazil
  • Impact of climate change of food security, which is allocated to South Africa
  • The enhancement of agricultural technology, cooperation and innovation that is allocated to India
  • Creation of an information base of BRICS countries that is allocated to China

In 2012, at the annual conference of the Agricultural Economics Association of South Africa, the National Agricultural Marketing Council (NAMC) co-hosted a workshop aimed at establishing a dialogue on how agriculture can benefit from South Africa’s membership of the BRICS. It came out clearly from the workshop that agriculture needs to be better positioned to benefit from the BRICS formation. One important issue that was noted was that market access for South African agricultural produce into the BRICS countries could be improved. In this regard, an honest question was raised whether, as the country’s agriculture stakeholders, we fold our arms and do nothing since this this is a political formation (while market access is an economic issue), or whether we use this political formation to address our socioeconomic issues as they relate to these countries. Market access is one of the issues of interest to South Africa’s agriculture industry within the BRICS formation, together with issues such as the diffusion of technologies and collaborations.

The research that is presented in this book addresses a range of important issues related to the trade and investment relations among these countries. The performance of their agricultural sectors as well as trade amongst these countries is also examined. There is also focus on the relationship between BRICS and Africa, and what this means for South Africa’s trade relations with other African countries. Source: Tralac

The folk at Tralac have provided some welcomed insight to the challenges and the pains in regard to ‘regionalisation’. No doubt readers in Member States will be familiar with these issues but powerless within themselves to do anything due to conflict with national imperatives or agendas. Much of this is obvious, especially the ‘buzzwords’ – globally networked customs, one stop border post, single window, cloud computing, and the plethora of WCO standards, guidelines and principles – yet, the devil always lies in the details. While the academics have walked-the-talk, it remains to be seen if the continent’s governments have the commitment to talk-the-walk!

Regional integration is a key element of the African strategy to deal with problems of underdevelopment, small markets, a fragmented continent and the absence of economies of scale. The agreements concluded to anchor such inter-state arrangements cover mainly trade in goods; meaning that trade administration focuses primarily on the physical movement of merchandise across borders. The services aspects of cross-border trade are neglected. And there are specific local needs such as the wide-spread extent of informal trading across borders.

Defragmenting Africa WBThis state of affairs calls for specific governance and policy reforms. Effective border procedures and the identification of non-tariff barriers will bring major cost benefits and unlock huge opportunities for cross-border trade in Africa. The costs of trading remain high, which prevents potential exporters from competing in global and regional markets. The cross-border production networks which are a salient feature of development in especially East Asia have yet to materialise in Africa.

Policy makers have started paying more attention to trade-discouraging non-tariff barriers, but why does the overall picture still show little progress? The 2012 World Bank publication De-Fragmenting Africa – Deepening Regional Trade Integration in Goods and Services shows that one aspect needs to be singled out in particular:  that trade facilitation measures have become a key instrument to create a better trading environment.

The main messages of this WB study are:

  • Effective regional integration is more than simply removing tariffs – it is about addressing on-the-ground constraints that paralyze the daily operations of ordinary producers and traders.
  • This calls for regulatory reform and, equally important, for capacity building among the institutions that are charged with enforcing the regulations.
  • The integration agenda must cover services as well as goods……services are critical, job-creating inputs into the competitive edge of almost all other activities.
  • Simultaneous action is required at both the supra-national and national levels. Regional communities can provide the framework for reform, for example, by bringing together regulators to define harmonised standards or to agree on mutual      recognition of the qualification of professionals……. but responsibility for implementation lies with each member country.

African governments are still reluctant to implement the reforms needed to address these issues. They are sensitive about loss of ‘sovereign policy space’ and are not keen to establish supra-national institutions. They are also opposed to relaxing immigration controls. The result is that border control functions have been exercised along traditional lines and not with sufficient emphasis on trade facilitation benefits. This is changing but specific technical and governance issues remain unresolved, despite the fact that the improved border management entails various technical aspects which are not politically sensitive.

The required reforms involve domestic as well as regional dimensions. Regional integration is a continental priority but implementation is compounded by legal and institutional uncertainties and burdens caused by overlapping membership of Regional Economic Communities (RECs). The monitoring of compliance remains a specific challenge. Continue Reading…

fDI 2013-14 Rankings for Africa

fDI 2013-14 Rankings for Africa

South Africa has been crowned as the African Country of the Future for 2013/14 by fDi Magazine, One of the economic powerhouses of the African continent, South Africa has been named fDi Magazine’s African Country of the Future 2013/14, with Morocco in second position and Mauritius in third. New entries into the top 10 include Nigeria and Botswana. Click here to access the full report!

South Africa has consistently outperformed its African neighbours in FDI attraction since fDi Markets records began in 2003. Figures for 2012 build upon South Africa’s historical prominence as an FDI destination with the country attracting about one-fifth of all investments into the continent – more than double its closest African rival, Morocco. In 2012, FDI into South Africa amounted to $4.6bn-worth of capital investment and the creation of almost 14,000 jobs.

South Africa claimed the title of fDi’s African Country of the Future 2013/14 by performing well across most categories, obtaining a top three position for Economic Potential, Infrastructure and Business Friendliness. Its attractiveness to investors is evident in its recent FDI performance, where the country defied the global trend with 2011 and 2012 figures surpassing its pre-crisis 2008 statistics. Despite a slight decline of 3.9% in 2012, South Africa increased its market share of global FDI, which further increased in the first five months of 2013 as the country attracted 1.37% of global greenfield investment projects. According to fDi Markets, South Africa now ranks as the 16th top FDI destination country in the world.

South Africa’s largest city, Johannesburg, was the top destination for FDI into Africa and is one of only five African cities that attracted more investments in the first five months of 2013 compared to the same period of 2012. South Africa ranked third behind the US and the UK as a top source market for the African continent in 2012, accounting for 9.2% of FDI projects.

In 2010, South Africa became the ‘S’ of the BRICS – five major emerging national economies made up by Brazil, Russia, India and China. While FDI into South Africa fell 3.9% in 2012, this was the lowest recorded decline of the BRICS grouping which, on average, experienced a 20.7% decline in FDI. In its submission for fDi’s African Countries of the Future 2013/14, Trade and Investment South Africa (TISA) stresses the importance of the country’s attachments to its BRICS partners. Source: fDI Magazine

CBP personnel in Sault Ste Marie take a moment to recognize the fallen on 9/11 at the International Bridge. (Picture: US Customs & Border Protection)

CBP personnel in Sault Ste Marie take a moment to recognize the fallen on 9/11 at the International Bridge. (Picture: US Customs & Border Protection)

 

Also see –

9/11 – The Significance for Customs

9/11 Vivid Memories

 

CINS Cargo Incident Visual GraphicPoor or incorrect packing accounts for 37 per cent of cargo incidents in the supply chain, according to data released by the Cargo Incident Notification System (CINS).

And 24 per cent of incidents cases are due to mis-declaration of the cargo, it found. The organisation is managed by the Container Owners Association (COA), and was set up by members from five of the COA’s top 20 liner operators; CMA CGM, Evergreen Line, Hapag-Lloyd, Maersk Line and the Mediterranean Shipping Company.

It was created to capture key data, after an increase in incidents that regularly disrupt operations and endanger lives, property or the environment.

CINS’ analysis revealed that 80 per cent of substances involved in cargo incidents are dangerous goods, with half relating to leakage and a further quarter announced mis-declared.

It also showed that incidents relating to mis-declared cargo have increased significantly within the first four months of 2013, compared to the previous 18 months, which the company says has led it to aspire to identify ways to make the supply chain safer.

“We have identified that 24 per cent of all incidents involve mis-declaration and this is probably the first time that this ‘iceberg’ risk has been quantified, said Reinhard Schwede, chairman of CINS.

“Poor or incorrect packaging are persistent causes, accounting for almost 40 per cent of incidents over nearly two years. This is all the more concerning when we recognise that more than a third of the incidents involve corrosive cargoes, which by nature will react with other substances.

“With these findings, the CINS Organisation will engage with enforcement agencies, competent authorities and the IMO to gain support for the relevant changes to legislation or other safe practice recommendations.” Source: Container Owner Association

India’s currency plumbed record lows this week as investors withdrew money from emerging markets (Photo: Financial Times)

India’s currency plumbed record lows this week as investors withdrew money from emerging markets (Photo: Financial Times)

A not-so-sobering look into the immediate future of emerging market darlings who have lost their lustre as investors ponder life without US quantitative easing. Even more worrying considering the possible impact for IBSA countries.

India, 1991. Thailand and east Asia, 1997. Russia, 1998. Lehman Brothers, 2008. The eurozone from 2009. And now, perhaps, India and the emerging markets all over again.

Each financial crisis manifests itself in new places and different forms. Back in 2010, José Sócrates, who was struggling as Portugal’s prime minister to avert a humiliating international bailout, ruefully explained how he had just learned to use his mobile telephone for instant updates on European sovereign bond yields. It did him no good. Six months later he was gone and Portugal was asking for help from the International Monetary Fund.

This year it is the turn of Indian ministers and central bankers to stare glumly at the screens of their BlackBerrys and iPhones, although their preoccupation is the rate of the rupee against the dollar.

India’s currency plumbed successive record lows this week as investors decided en masse to withdraw money from emerging markets, especially those such as India with high current account deficits that are dependent on those same investors for funds. Black humour pervaded Twitter in India as the rupee passed the milestone of Rs65 to the dollar: “The rupee at 65 – time to retire”.

The trigger for market mayhem in Mumbai, Bangkok and Jakarta was the realisation that the Federal Reserve might – really, truly – soon begin to “taper” its generous, post-Lehman quantitative easing programme of bond-buying. That implies a stronger US economy, rising US interest rates and a preference among investors for US assets over high-risk emerging markets in Asia or Latin America.

The fuse igniting each financial explosion is inevitably different from the one before. Yet the underlying problems over the years are strikingly similar.

So are the three principal phases – including the hubris and the nemesis – of the economic tragedies they endure. No one who has examined the history of the nations that fell victim to previous financial crises should be shocked by the way the markets are treating India or Brazil today.

First comes complacency, usually generated by years of high economic growth and the feeling that the country’s success must be the result of the values, foresight and deft policy making of those in power and the increasing sophistication of those they govern. Sceptics who warn of impending doom are dismissed as “Cassandras” by those who forget not only their own fragilities but also the whole point about the Trojan prophetess: it was not that she was wrong about the future, it was that she was fated never to be believed.

So high was confidence only a few months ago in India – as in Thailand in the early 1990s – that economists predicted that the local currency would rise, not fall, against the dollar.

Indian gross domestic product growth had topped 10 per cent a year in 2010, and the overcrowded nation of 1.3bn was deemed to be profiting from a “demographic dividend” of tens of millions of young men and women entering the workforce. The Indian elephant was destined to overtake the Chinese dragon in terms of GDP growth as well as population size.

Deeply ingrained in the Indian system, says Pratap Bhanu Mehta, head of the Centre for Policy Research in New Delhi, was an “intellectual belief that there was some kind of force of nature propelling us to 9 per cent growth … almost of a sense of entitlement that led us to misread history”.

In the same way, the heady success of the southeast Asian tigers in the early 1990s had been attributed to “Asian values”, a delusional and now discredited school of thought that exempted its believers from the normal rules of economics and history because of their superior work ethic and collective spirit of endeavour.

The truth is more banal: the real cause of the expansion that precedes the typical financial crisis is usually a flood of cheap (or relatively cheap) credit, often from abroad.

Thai companies in the 1990s borrowed dollars short-term at low rates of interest and made long-term investments in property, industry and infrastructure at home, where they expected high returns in Thai baht, a currency that had long been held steady against the dollar.

The same happened in Spain and Portugal in the 2000s, although the low-interest loans that fuelled the unsustainable property boom were mostly north-to-south transfers within the eurozone and therefore in the same currency as the expected returns. Indeed, the euro was labelled “a deadly painkiller” because the use of a common currency hid the dangerous financial imbalances emerging in southern Europe and Ireland.

Phase Two of a financial crisis is the downfall itself. It is the moment when everyone realises the emperor is naked; to put it another way, the tide of easy money recedes for some reason, and suddenly the current account deficits, the poverty of investment returns and the fragility of indebted corporations and the banks that lent to them are exposed to view.

That is what has started happening over the past two weeks as investors take stock of the Fed’s likely “tapering”. And the fate of India – the rupee is one of the “Fragile Five”, according to Morgan Stanley, with the others being the currencies of Brazil, Indonesia, South Africa and Turkey – is particularly instructive. (Emphasis mine).

It is not that all of India’s economic fundamentals are bad. As Palaniappan Chidambaram, finance minister, said on Thursday, the public debt burden has actually fallen in the past six years to less than 70 per cent of GDP – but then the same was true of Spain as it entered its own grave economic crisis in 2009.

Like Spain, India has tolerated slack lending practices by quasi-official banks to finance the huge property and infrastructure projects of tycoons who may struggle to repay their loans.

Ominously, bad and restructured loans have more than doubled at Indian state banks in the past four years, reaching an alarming 11.7 per cent of total assets. According to Credit Suisse, combined gross debts at 10 of India’s biggest industrial conglomerates have risen 15 per cent in the past year to reach $102bn.

For those who take the long view, a more serious failing is that India has manifestly missed the kind of economic opportunity that comes along only once in an age.

Instead of welcoming investment with open arms and replacing China as the principal source of the world’s manufactured goods, India under Sonia Gandhi and the Congress party, long suspicious of business, has opted to enlarge the world’s biggest welfare state, subsidising everything from rice, fertiliser and cooking gas to housing and rural employment.

Former fans of her prime minister, Manmohan Singh – who as finance minister liberalised the economy, ended the corrupt “licence Raj” and extracted India from a severe balance of payments crisis with the help of an IMF loan – could only shake their heads when he boasted last week that no fewer than 810m Indians would be entitled to subsidised food under a new Food Security Bill.

The bill is a transparent attempt by Congress to improve its popularity ahead of the next general election, but the government’s critics are horrified at the idea of offering Indians more handouts rather than creating the conditions that would give them jobs and allow them to buy their own. The resulting strain on the budget may also worsen the risk of “stagflation”, a toxic mixture of economic stagnation and high inflation.

India’s annual growth rate has already halved in three years to about 5 per cent and could fall further towards the 3 per cent “Hindu rate of growth” for which the country was mocked in the 1980s.

If currency declines and balance-of-payments difficulties develop into a full-blown financial crisis in the coming months, India will be propelled unwillingly into the third and final phase of the trauma.

Phase Three is when ministers and central bank governors survey the wreckage of a once-vibrant economy and try to work out how to rebuild it.

It is traditional for those governments that survive, and for the ones replacing those that do not, to announce several false dawns and to see “green shoots” that turn out to be illusory.

It is hard when times are bad to impose financial discipline that would have been easier to apply before. Indian policy makers are already torn between the need to lower interest rates to boost growth and the necessity of raising them to protect the rupee and tackle inflation – the same kind of tension between austerity and easy money that has afflicted developed economies since 2008.

India’s underlying economy is nevertheless sound and its banks are safe, say Mr Chidambaram and other senior officials. There is therefore no need to contemplate asking for help from the IMF or anyone else.

Mr Sócrates said much the same in Lisbon three years ago. “Portugal doesn’t need any help,” he said, almost leaping from his chair. “We only need the understanding of the markets.” The markets did not understand, and Portugal did need the help.

Source – Victor Mallet of the Financial Times August 23, 2013

WEF - Global Competitiveness Report 2013-14South Africa is ranked 53rd this year, overtaking Brazil to place second among the BRICS. South Africa does well on measures of the quality of its institutions (41st), including intellectual property protection (18th), property rights (20th), and in the efficiency of the legal framework in challenging and settling disputes (13th and 12th, respectively). The high accountability of its private institutions (2nd) further supports the institutional framework.

Furthermore, South Africa’s financial market development remains impressive at 3rd place. The country also has an efficient market for goods and services (28th), and it does reasonably well in more complex areas such as business sophistication (35th) and innovation (39th). But the country’s strong ties to advanced economies, notably the euro area, make it more vulnerable to their economic slowdown and likely have contributed to the deterioration of fiscal indicators: its performance in the macroeconomic environment has dropped sharply (from 69th to 95th).

Mauritius moves up by nine places this year to 45th place, becoming the highest ranked country in the sub-saharan region.

Low scores for the diversion of public funds (99th), the perceived wastefulness of government spending (79th), and a more general lack of public trust in politicians (98th) remain worrisome, and security continues to be a major area of concern for doing business (at 109th).

Building a skilled labor force and creating sufficient employment also present considerable challenges. The health of the workforce is ranked 133rd out of 148 economies-the result of high rates of communicable diseases and poor health indicators more generally.

The quality of the educational system is very poor (146th), with low primary and tertiary enrollment rates. Labor market efficiency is poor (116th), hiring and firing practices are extremely rigid (147th), companies cannot set wages flexibly (144th), and significant tensions in labor-employer relations exist (148th). Raising educational standards and making the labor market more efficient will thus be critical in view of the country’s high unemployment rate of over 20 percent, with the rate of youth unemployment estimated at close to 50 percent. For the full report, click here!

High Density Container Terminal  (Picture credit - Getty Images)

High Density Container Terminal (Picture credit – BBC News/Getty Images)

Thanks to the kind reader who passed me this story. BBC News Environment correspondent, Matt McGrath, reports that current methods of measuring the full material cost of imported goods are highly inaccurate. In a new study, researchers have found that three times as many raw materials are used to process and export traded goods than are used in their manufacture.

Richer countries who believe they have succeeded in developing sustainably are mistaken say the authors. The research has been published  (click hyperlink to access the report) in the Proceedings of the National Academy of Sciences.

Many developed nations believe they are on a path to sustainable development, as their economic growth has risen over the past 20 years but the level of raw materials they are consuming has declined.

According to  Dr Tommy Wiedmann University of New South Wales “We are saying there is something missing, if we only look at the one indicator we get the wrong information”. This new study indicates that these countries are not including the use of raw materials that never leave their country of origin.

The researchers used a new model that looked at metal ores, biomass, fossil fuels and construction materials to produce what they say is a more comprehensive picture of the “material footprint” of 186 countries over a 20 year period.

“The trade figure just looks at the physical amounts of material traded, but it doesn’t take into account the materials that are used to produce these goods that are traded – so for something like fertiliser, you need to mine phosphate rocks, you need machinery, so you need extra materials.”

In this analysis, the Chinese economy had the largest material footprint, twice as large as the US and four times that of Japan and India. The majority comes from construction minerals, reflecting the rapid industrialisation and urbanisation in China over the past 20 years.

The US is by far the largest importer of these primary resources when they are included in trade. Per capita, the picture is different, with the largest exporters of embodied raw materials being Australia and Chile.

According to the model, South Africa was the only country which had increased growth and decreased consumption of materials.

The researchers believe their analysis shows that the pressure on raw materials doesn’t necessarily decline as affluence grows. They argue that humanity is using natural materials at a level never seen before, with far-reaching environmental consequences.

They hope the new material footprint model will inform the sustainable management of resources such as water. The authors believe it could lead to fairer and more effective climate agreements.

“Countries could think about agreements where they help reduce the emissions at that point of material use,” said Dr Wiedmann. “That’s where it is cheapest to do, where it is most efficient, where it makes more sense.” Source: BBC News