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ADB President Calls for Stronger Efforts to Fight Corruption

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Asian Development Bank (ADB) President Takehiko Nakao has called for increased efforts from ADB staff, member governments, and other development partners to help fight corruption, money laundering, and other illicit activities that derail economic development and the achievement of social equity in the Asia and Pacific region.

Mr. Nakao led the celebration of International Anticorruption Day held at ADB headquarters in Manila today. Nikos Passas, Professor of Criminology and Criminal Justice at Northeastern University in the United States, and Sayed Ikram Afzali, Executive Director of Integrity Watch Afghanistan, delivered keynote addresses.

“Corruption, money laundering, and tax evasion damage economic development as well as fairness among people. There is also a growing consensus that these activities are threats to the basic fabric of society, including safety and security,” said Mr. Nakao. “We have a professional obligation to fight these illicit activities. This fight is necessary to advance economic development in the Asia and Pacific region and to promote social equity.”

Global losses to corruption, money laundering, and tax evasion is estimated at $800 billion to $2 trillion every year—an amount that could instead be used by developing countries to achieve their Sustainable Development Goals commitments. Corruption also breeds organized crime and terrorism and poses a serious threat to safety and security, particularly for states considered fragile and conflict-affected, several of which are in Asia and the Pacific.

To combat these activities, ADB has adhered to zero-tolerance policies to prevent corrupt practices from negatively impacting ADB-supported projects. For instance, ADB introduced new rules in 2015 for both its sovereign and nonsovereign operations to ensure integrity due diligence for project partners and tightened controls for corruption, money laundering, and terrorist financing. In 2016, ADB updated its Anticorruption Policy to include the prevention of cross-border tax evasion.

ADB is also increasing its technical assistance to enhance the capacity of developing member countries to meet international standards for tax transparency, counter tax evasion, and protect themselves against aggressive forms of tax planning. In July this year, ADB established the Domestic Resource Mobilization Trust Fund with the support of the Government of Japan to help countries close tax loopholes in their financial sectors, enhance tax compliance, and develop transparent and effective tax administration.

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Digitalized TIR Convention can help Landlocked Developing Countries boost trade

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The transport costs of the world`s 32 Landlocked Developing Countries (LLDCs) are on average 50% higher than developing countries that have access to the open sea. If containerized imports are considered, LLDCs have costs that are 85% higher than the world average. As a result, LLDC exports are less competitive and the average LLDC has only 60% of the trade volume of the average coastal country.

This was recognized by Governments in 2014 when adopting the Vienna Programme of Action for LLDCs (VPoA) which stresses the need to promote harmonization, simplification and standardization of rules and documentation, including the full and effective implementation of international conventions on transport and transit. The UNECE-administered TIR Convention is a key legal instrument to achieve this – it establishes and regulates the only existing and operational global customs transit system, reducing transport times by up to 80% and costs by up to 38%. 

With this in mind, UNECE, UN-OHRLLS, World Customs Organization (WCO) and International Road Transport Union (IRU) joined forces to organize a designated side event on “Modernization of the transit process – opportunities offered by TIR” held in the margins of the High-level Midterm Review Meeting of the Vienna Programme of Action for LLDCs.

The TIR Convention has a broad geographic coverage with 76 Contracting Parties, including the European Union. There are currently 34,000 authorized TIR carnet holders that use the transit regime quickly and reliably move goods across international borders, resulting in over 1 million TIR transports being carried out annually (figure for 2019).

Mr. Konstantinos Alexopoulos, TIR Secretary at the UNECE, said: “The TIR Convention is really at the heart of the Vienna Programme of Action which among other priorities emphasises the importance of freedom of transit and transit facilities”.  He added “The Convention applies to transports with road vehicles, combinations of vehicles as well as containers which allows for the use of the TIR Carnet across all modes of transport, including railways, inland waterways and maritime transport provided that at least one leg of the journey is made by road.”

According to an IRU study for selected countries in the Asia-Pacific region, the benefits of implementing the TIR Convention range between 0.14 and 1.31 per cent of national GDP – a figure which could be significantly higher for LLDCs.

Convinced that computerization and digitalization of transport documents brings considerable time, cost and efficiency gains, the 76 TIR Contracting Parties, out of which many are LLDC or transit developing countries, have been implementing, since 2017, a series of eTIR pilot projects, such as between the Islamic Republic of Iran and Turkey, and Georgia and Turkey. Other eTIR projects are currently under development, such as the eTIR intermodal project between Azerbaijan, Georgia, Kazakhstan and Ukraine or the eTIR project between Azerbaijan and Islamic Republic of Iran.

Mr. Nijat Mikayilov from the Ministry of Transport, Communications and Advanced Technologies of Azerbaijan said “The eTIR pilots mark a new era of transit operations and clearly demonstrate that the new paperless digital TIR works efficiently in a real transit environment”. He added: “These new digital TIR corridors enable larger, faster and more efficiently processed trade and transport flows and have the potential to boost economic development for many LLDCs in our region.”

In October 2019, based on the positive experiences of the countries involved in the eTIR pilots, the TIR Administrative Committee agreed to a set of amendments – for formal adoption in February 2020 – to be introduced in the TIR Convention, providing the legal basis for the TIR system to operate fully electronically. The so-called eTIR procedure will open new applications for the TIR system, in particular in the area of intermodal transport, for which the current paper procedure has proved cumbersome. This long-awaited revolution of the TIR system will not only provide a facilitated procedure for transport companies but will also further secure the TIR system for the benefit of all customs administrations using it.

The additional efficiency gains enabled through the fully computerized eTIR procedure could convince countries which have not yet ratified the TIR Convention to do so, in particular for LLDCs and in parts of the world were complex border crossing procedures still jeopardize international trade and, ultimately, economic development.

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EU Politics

Agreement on linking the emissions trading systems of the EU and Switzerland

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As ministers gather at the COP25 in Madrid to discuss the rules for international carbon markets, the EU and Switzerland finalised the process that allows for the link of their emissions trading systems to enter into force. As of 2020 allowances from both systems can be used for compliance to compensate for emissions occurring in either system. The Linking Agreement between the EU and Switzerland is the first of its kind, and demonstrates that emissions trading systems can pave the way to broader international carbon markets.

Executive Vice-President Frans Timmermans said: “The Linking Agreement between the EU and Switzerland, which also covers the aviation sector, sends a strong signal that we can create broader and more comprehensive carbon markets with benefits to our climate and environment.”

There are significant benefits to linking carbon markets. By expanding the market and increasing the availability of emission reduction opportunities, the cost-effectiveness of the linked systems can be increased and their liquidity enhanced, thus resulting in better burden sharing, more efficient emissions reductions, and decreased overall compliance costs. The European Green Deal will strongly support these principles, underlining that with linked carbon markets we can bring carbon prices in different countries closer together, which in turn may reduce carbon leakage risks. Linking also strengthens cooperation between parties with binding targets and encourages others to take action, as well as to support global cooperation on climate change and the development of a global carbon market.

Background

The EU ETS Directive allows for linking, provided both systems are compatible, mandatory and have an absolute emission caps. These conditions for linking have been laid down in the Annexes to the Linking Agreement and will ensure that both parties meet these requirements.

Negotiations on the Linking Agreement between the EU and Switzerland started in 2011. The linking agreement was signed at the end of 2017 and will enter into force on 1 January 2020.

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Environment

Are Nature Based Solutions the key to Africa’s climate response?

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While the UN climate talks are celebrating their 25th year, carbon emissions around the world have continued to climb. For many, that is where natural solutions could play a key role in managing a dramatic climate transition.

Nature-based solutions or the process of working with and around natural ecosystems to deliver real-world benefits for climate resilience and sustainable development, took center stage on day 4 of COP25 in Madrid).

The African Development Bank has three main approaches to nature-based solutions; namely, restoring damaged ecosystems (land, forests and water bodies), conserving biodiversity, and integrated natural resources management.

Vanessa Ushie, Manager of the Policy Analysis Division at the Bank’s African Natural Resource Centre, briefed delegates at COP 25 about the Centre’s work during a panel discussion on Tuesday.

“Nature-based solutions are easy to use, and very effective in improving community livelihoods and resilience to climate change. The AfDB is scaling up the use of nature-based solutions to address climate impacts on critical ecosystems and biodiversity in Africa,” Ushie said.

UN biodiversity expert Valerie Kapos described a range of natural solutions being implemented across Africa, and around the world. These included protecting rivers, forests, and marine solutions, to benefit local economies.

“We need to be applying that argument to whichever solutions we are choosing,” said Kapos, Head of Climate Change and Biodiversity at the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC).

This is definitely true for the Seychelles, which has been appointed by the African Union to be the champion of the blue or ocean economy across the continent. While the continent is known for its deserts and jungles, a blue economic transition will be essential for the 48 coastal states that collectively make up the world’s longest coastline.

“We have protected 47% of our land, and are moving toward 50%. But our ocean territory is 3,000 times bigger than our land territory, and we are on track to protect 30% of that area,” said Ronald Jumeau, Permanent Representative of the Seychelles at the UN.

This was made possible by one of the world’s biggest debt-swap programs. The debt-for-nature deal was made possible through The Nature Conservancy, which bought the island nation’s $400 million sovereign debt at a discount. That money will be re-invested in nature conservation programmes.

“Through this program we have funded mangrove restoration and climate education programmes,” said Angelique Pouponneau, who runs a Seychelles-based trust fund focusing on climate adaptation and conservation.

Ushie from the African Development Bank pointed out that “one thing we are looking at is changing the way in which lending is being channeled to Africa, and how nature can be integrated in the measurement of national wealth and sovereign credit ratings for African countries.”

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