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Pensions reforms have slowed in OECD countries but need to continue

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Further reforms are needed across OECD countries to mitigate the impact of population ageing, increasing inequality among the elderly and the changing nature of work, according to a new OECD report.

Pensions at a Glance 2017 says that public spending on pensions for the OECD as a whole has risen by about 1.5% of GDP since 2000. However, the pace of spending growth is projected to slow substantially. 

 At the same time, recent reforms will lower the incomes of many future pensioners. People will live longer and to ensure a decent pension would have to postpone the age of retirement.

“The challenges of financial sustainability and pension adequacy mean that bold action from governments is still needed,” said OECD Secretary-General Angel Gurría. “The world of work is changing fast and policy makers must ensure that decisions made today take this into account and our pension and social protection systems do not leave anyone behind in retirement.”

 The net replacement rate from mandatory pension schemes for full-career average-wage earners entering the labour market today is equal to 63% on average in OECD countries, ranging from 29% in the United Kingdom to 102% in Turkey. On average, replacement rates for low-income earners are 10 points higher and range from under 40% in Mexico and Poland, to more than 100% in Denmark, Israel and the Netherlands.

 Over the past two years, one-third of OECD countries changed contribution levels, another third modified benefit levels for all or some retirees and three countries legislated new measures to increase the statutory retirement age. Under legislation currently in place, by 2060 the normal retirement age will increase in roughly half of the OECD countries, by 1.5 years for men and 2.1 years for women on average, reaching just under 66 years. The future retirement age will range from 60 years in Luxembourg, Slovenia and Turkey to 74 in Denmark, according to the latest estimations.

 The projected increase in retirement ages will be exceeded, however, by expected advances in longevity, meaning that the time people spend in retirement will increase relative to people’s working lives. Employment at older ages will need to increase further to ensure adequate pensions for many people, according to the report.

 Pensions at a Glance 2017 also looks at ways countries can meet the growing calls for more flexible retirement options. Rigidly set retirement ages might not be beneficial for society as a whole. Currently, only around 10% of Europeans aged 60-69 combine work and pensions. Of those that do work beyond the age of 65, half work part-time — a share that has been stable since the 1990s. Several countries including Australia, the Czech Republic, France and the Netherlands allow for early partial-retirement schemes.

 Obstacles to combining work and pensions after the official retirement age exist, for example through earnings limits in Australia, Denmark, Greece, Israel, Japan, Korea and Spain. Barriers to continuing to work beyond the retirement age also exist outside the pension system, especially through age discrimination from employers or in cultural acceptance of part-time work.

 Overall, for people with full careers, retirement is more flexible around the retirement age in Chile, the Czech Republic, Estonia, Italy, Mexico, Norway, Portugal, the Slovak Republic and Sweden.

 Policy makers need to ensure that postponing retirement should be sufficiently rewarding while not overly penalising people who retire a few years before the normal retirement age. In Estonia, Iceland, Japan, Korea and Portugal, the financial incentives to continue working after the retirement age are large but costly for pension providers. Flexibility should be conditional on ensuring the financial balance of the pension system, with pension benefits actuarially adjusted in line with the flexible age of retirement.

 Pensions at Glance 2017 provides comparative indicators on the national pension systems of the 35 OECD countries, as well as for Argentina, Brazil, China, India, Indonesia, the Russian Federation, Saudi Arabia and South Africa.

 Country notes are available for Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland, the United Kingdom and the United States.

 A recent OECD report, Preventing Ageing Unequally, also analysed the impact of rising inequalities and population ageing. It found that younger generations will face greater risks of inequality in old age than current retirees and for generations born since the 1960s, their experience of old age will change dramatically relative to that of previous generations.

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APEC Needs to Look Beyond Numbers, Bring Concrete Benefits to People

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The current volatility and uncertainty of the international trade environment requires APEC to be dynamic, said Dato’ Sri Norazman Ayob, Deputy Secretary General of Industry of Malaysia’s Ministry of International Trade and Industry.

“Integration of the global supply chain carries inherent systemic risk of disruption to domestic economies in the event of a major breakdown along the value chain,” he said during his remarks at a dialogue with stakeholders focused on APEC’s post-2020 vision in Putrajaya on Wednesday. “Businesses would need to constantly reassess their business models to ensure business continuity.”

Notwithstanding, the ever-changing environment requires constant rebalancing measures from regulators and industry players to encourage domestic industrial development to ensure economic growth remains sustainable. 

Norazman argued that as the premier economic forum in the region, APEC needs to realign its priorities to look at economic growth beyond creating equal opportunities and prosperity through trade and investment, “but also tangible benefits to the people.”

He noted that APEC’s goal of free and open trade in the region, otherwise known as the Bogor Goals, has brought integration to the region by reducing trade barriers and addressing regulatory issues.

Average tariffs within APEC have fallen from 17 percent in 1989 to 5.3 percent in 2018. During the same period, APEC’s share of world’s trade increased from 41 percent to 48 percent. APEC economies account for more than 80 percent of Malaysia’s total trade.

“Despite these achievements, we are very much living in a world where uncertainty is the new normal and economies have to be prepared to constantly embrace change in order to survive in the current global environment,” Norazman explained.

One of the key deliverables for Malaysia as the host of APEC this year is to lead the development of the new APEC vision that will guide the forum’s work in the next decades.

Guided by the overarching concept of “Shared Prosperity”, Malaysia plans to introduce initiatives to enable trade and investments to generate concrete outcomes for the people in the region.

According to Norazman, Malaysia will promote the development of the digital economy and encourage effective use of advanced technologies to improve living standards, create equal employment opportunities and achieve a more balanced growth across the region.

“The Post-2020 Vision has to ensure that people are put at the core of the discussion,” he concluded. “A more holistic approach that includes inclusivity, equality and sustainability can be explored in ensuring that no one is left behind.”

Senior Officials from APEC economies will gather in Putrajaya on 21-22 February 2020 to discuss the initiatives and work plans for the year.

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Afghanistan: Civilian casualties exceed 10,000 for sixth straight year

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More than 10,000 civilians in Afghanistan were killed and injured last year, according to a new United Nations report that details record-high levels of civilian harm in the ongoing conflict.

“Almost no civilian in Afghanistan has escaped being personally affected in some way by the ongoing violence,” Tadamichi Yamamoto, the UN Special Representative for Afghanistan and head of the UN Assistance Mission in Afghanistan (UNAMA),  said  on Saturday. 

The report, entitled Afghanistan Annual Report on Protection of Civilians in Armed Conflict: 2019, documents 3,403 civilians killed and 6,989 injured – with the majority of the civilian casualties inflicted by anti-Government elements. 

It is the sixth year in a row that the number of civilian casualties has exceeded 10,000.

Grim milestone

After more than a decade of systematically documenting the impact of the war on civilians, the UN found that in 2019 the number of civilian casualties had surpassed 100,000.

“It is absolutely imperative for all parties to seize the moment to stop the fighting, as peace is long overdue; civilian lives must be protected and efforts for peace are underway”, stressed Mr. Yamamoto.

The figures outlined in the report, released jointly by UNAMA and the UN Human Rights Office, represent a five per cent decrease over the previous year, mainly due to a drop in civilian casualties caused by the terrorist group ISIL. 

However, civilian casualties caused by the other parties rose, including a 21 per cent increase by the Taliban and an 18 per cent surge by the international military forces, mainly due to an increase in improvised explosive device attacks and airstrikes. 

Protect civilians

“All parties to the conflict must comply with the key principles of distinction, proportionality and precaution to prevent civilian casualties,” said Michelle Bachelet, the UN High Commissioner for Human Rights. 

To ensure accountability, the report calls on all conflict parties to conduct prompt, effective and transparent investigations into all allegations of violations of international human rights law and international humanitarian law. 

“Belligerents must take the necessary measures to prevent women, men, boys and girls from being killed by bombs, shells, rockets and improvised mines; to do otherwise is unacceptable”, concluded the High Commissioner.

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UNIDO and Switzerland expand cooperation to support cocoa value chain in Nicaragua’s mining triangle

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photo: UNIDO

LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO), and Federal Councillor Ignazio Cassis, Foreign Minister of the Swiss Confederation, have signed an agreement for a second phase of PROCACAO, a project to improve the productive and organizational capacities of cocoa producers in the so-called mining triangle in the northeast Nicaragua.

With a budget of US$4.845m over four years, the project will increase the productivity and competitiveness of actors along the cocoa value chain. By the end of the project, the income of at least 1,250 cocoa-producing families will have increased, as will the overall production of cocoa. Eighty per cent of producers will be certified with the Rainforest Alliance seal.

To obtain these results, the project is built on the dialogue with the main investment companies and the public sector; the project supports cocoa cooperatives and producers to be able to apply the protocol set up by large private buyers. It will establish agribusiness services driven by young people in order to improve the yield and the quality of the cocoa. Quality certification and best environmental practices will be target to improve and sustain the income from cocoa. 

The partnership between UNIDO and the Swiss Agency for Development and Cooperation started in 2015. The first phase of the PROCACAO project achieved impact changes for producers, cooperatives and the cocoa market in the region. In the productive field, relevant technological advances were introduced by incorporating high-quality genetic material in cooperatives, establishing best practices for grafted cocoa, improving post-harvest work and advancing with the UTZ certification process in at least six cooperatives. At the market level, commercial relations were established with the main cocoa buyer present in the country. The commercialization options for fermented dry cocoa were expanded, ensuring the uptake of cocoa in the region.

Today, the scope of the initiative is to be widened even as the environmental challenges have increased. Thanks to the experience gained in the first phase, UNIDO believes that the region will emerge as a player in the international cocoa value chain, demonstrating a sustainable model that is able to integrate women and youth empowerment, as well as preserve biodiversity.

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