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Ukraine: Economic Growth Depends on Reforms and Financing

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Ukraine’s economy grew by 3.5 percent in the first half of 2018, supported by an early agriculture harvest and strong consumption growth from higher wages, pensions, and remittances, according to the World Bank’s latest Ukraine Economic Update. However, investor confidence is being held back by delays in key reforms, Ukraine’s large financing needs, and uncertainty surrounding the 2019 elections.

“The growth outlook depends on the pace of reforms and on reaching an agreement on the IMF program,” said Satu Kahkonen, World Bank Country Director for Belarus, Moldova and Ukraine. “This is particularly true because global financing conditions have tightened significantly for emerging markets in recent months.”

An agreement with the IMF, swift implementation of recently approved reforms, and progress on the unfinished reform agenda would send a positive signal to investors. If this happens, economic growth is projected to be 3.3 percent in 2018 and 3.5 percent in 2019, before rising to 4 percent in 2020 once election related uncertainties subside.

By contrast, if reforms do not progress and IMF reviews are not completed, overall growth could fall below 2 percent in 2019 as investor confidence deteriorates, macroeconomic vulnerabilities intensify, and financing difficulties force a compression in domestic demand.

Ukraine also needs financing for large public debt repayments in 2019 and 2020. In this context, approving and implementing a credible and affordable 2019 budget that meets the fiscal deficit target of 2.5 percent of GDP is critical. This will require affordable implementation of recent reforms in pensions, health, education, public administration, and housing utility subsidies.

It will also be important to avoid measures that reduce revenues, such as the proposed replacement of the corporate income tax with a capital exit tax which would result in the loss of an important revenue source in a challenging fiscal environment.

Higher oil prices fueled import growth by 15.3 percent from January to August 2018, while exports have suffered from both logistical difficulties in the Azov sea since July and from softening export commodity prices. With the current account projected to widen to 2.9 percent of GDP in 2018, it will be important to secure continued financing from development partners, attract foreign direct investment (FDI), and boost non-traditional exports.

Tapping Ukraine’s trade potential …

According to the World Bank’s Special Focus Note on international trade, Ukraine has tremendous potential to boost exports of higher-value added products, but this potential has not yet been realized.

Ukraine’s exports remain concentrated in metals and cereals, while the share of exports integrated with Global Value Chains (GVC) remains low at 5.7 percent in Ukraine, compared to 27 percent for Poland, 38 percent for Romania, 38 percent for Turkey, and 59 percent for Vietnam.

Boosting higher-value added and GVC exports is a major opportunity for Ukraine to leverage its special access to the EU market. Ukraine has demonstrated potential on this front through the exports of automotive ignition wiring sets which grew from $21 million in 2000 to $1.217 billion in 2017, one of the fastest growing export product categories in recent years.

Reforms to attract Foreign Direct Investment (FDI) are an important driver of exports and integration into GVCs. Specifically, this will require reforms to strengthen anticorruption measures and the rule of law, make progress on privatization, safeguard macroeconomic stability, and clean up the high share of non-performing loans.

Ukraine also needs to create an efficient and competitive logistics system to boost exports and accelerate its integration into the global economy. Specifically, this will require improving regulatory clarity and the management of public assets, increasing utilization of river transport, reforming the railway system, and addressing inefficiencies in the storage system.

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Africa Today

King Mohammed VI of Morocco launches Pan-African Giant Vaccine Production Plant

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Morocco is getting ready to produce its own vaccines. In Benslimane, King Mohammed VI kicked off on Thursday 27th of January the construction of a giant factory to manufacture Covid-19 and other vaccines.

With 3 industrial lines and a combined production capacity that will reach 116 million units in 2024, the Cherifian Kingdom is taking a giant step towards health and vaccine sovereignty.

Ensuring the country’s self-sufficiency in vaccines and making it a leading biotechnology platform on the African continent and the world is the objective of this industrial unit, called “SENSYO Pharmatech”.

A 500 million Euros Project

The challenge of this project, which will cost 500 million euros, is to transform the country into an essential biotechnology hub in Africa, capable of meeting the continent’s health needs in the short and long term, by integrating pharmaceutical research, clinical development, and the manufacture and marketing of essential biopharmaceutical products.

Through a massive transfer of know-how, the country will position itself, within the next 5 years, as the continent’s catalyst in research, development and production of advanced biopharmaceutical products.

Morocco is now shifting gears. From 2025, the country will be able to produce more than 2 billion doses of vaccines, with the support of one of the world leaders in biotechnology and the “Fill & Finish” industry, Swedish company Recipharm.

A 3 stages project

The project will be divided into 3 stages: The first phase involves the production launch of trial batches from 30 July 2022. The second phase, which will start in parallel with the first, will involve the transfer of the aseptic filling and active substance manufacturing of more than 20 vaccines and bio-therapeutic products, including 3 Covid-19 vaccines. Morocco thus aims to cover, by 2025, more than 70% of the Kingdom’s needs and more than 60% of those of the Continent.

The last step consists in creating, by 2030, an African biopharmaceutical and vaccine innovation cluster in Morocco, recognised worldwide, within the framework of a partnership between major international players in the fields of research and development of advanced technologies in vaccines and bio-therapeutic products and all the Moroccan supervisory institutions, in particular the Ministry of Higher Education, the Ministry of Health, the Ministry of the Interior, the Ministry of Industry and the Ministry of Finance.

Morocco leading the way in Africa

This announcement follows the signing of the agreements to launch the project to manufacture and syringe the anti-Covid19 vaccine and other vaccines, which was presided over on Monday 5 July by King Mohammed VI at the Royal Palace in Fez.

For the record, Morocco is at the top of the African podium in terms of vaccination, with more than 23 million people fully vaccinated to date. This is the largest vaccination campaign in Africa. Having understood for a long time that collective immunity is the only way out of the health crisis, the country launched a fierce battle around the vaccine very early on, by actively participating in the clinical trials.

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Environment

Environment contaminated with highly toxic substances, risking the health of nearby communities

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New research  published today by Zero Waste Europe (ZWE) about incinerators in three countries – Spain, Czechia, and Lithuania – finds a high level of contamination in the vicinity of incinerators, posing a significant risk to the environment and to the health of people living nearby.
 
To assess the real impact of waste incineration, the biomonitoring research conducted by  ToxicoWatch Foundation for ZWE analysed the presence of persistent organic pollutants (POPs) in the surroundings of incinerators in Valdemingómez (Spain), Pilsen (Czechia, and Kaunas (Lithuania).
 
The study used bioassays, an analytical method to determine the concentration or potency of a substance by its effect on living animals, plants, living cells, or tissues. This particular study used carefully collected biomarker samples – such as  eggs of backyard chickens, pine needles, and mosses – in areas around incinerators.
 
The research found that:

  • The majority of eggs analysed exceed the EU action limits for food safety as regulated in the EU Directive 2013/711/EU.
  • A high percentage of eggs exceed the safe level for consumption. If these eggs were intended for the commercial market, they should have been withdrawn from the market.
  • The analysis of the vegetation, pine needles, and moses also shows high levels of dioxins in the vicinity of the waste incinerators. This means people living in the vicinity of incinerators could be harmed if they eat vegetables grown in the contaminated soil for consumption.

The research warns of the impacts of the current incineration strategy for human health and highlights the incompatibility of the current incineration heavy strategy with the EU’s zero pollution agenda. It also gives a warning signal for contamination of the environment with highly harmful toxic substances for human health and the environment – such as dioxins (PCDD/F), dioxin-like PCBs, PAHs, and PFAS.

Janek Vähk, ZWE’s Climate, Energy, and Air Pollution Programme Coordinator, said: “There is an urgent need to assess the real impact of waste incineration on human health and the environment. People living near waste incinerators need to be reassured about their health risks and the safety of such combustion facilities
 
Based on the report conclusions, ZWE and the research project group strongly recommend to:

  • Make biomonitoring research mandatory for all existing incineration projects across Europe.
  • Mandate continuous measurement of chlorinated and brominated dioxins including under the “other than normal operating conditions” such as start-ups and shut-downs and technical accidents.
  • Put a moratorium on new waste incineration projects and develop phase-out plans for the existing ones.
  • Promote and fund circular, healthy, sustainable alternatives to waste incineration.

Read the full “The True Toxic Toll – Biomonitoring of waste incinerator emissions” reports: here

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Development

Repurposing Current Policies Could Deliver Multiple Benefits for Farmers

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A new World Bank and International Food Policy Research Institute (IFPRI) report finds that repurposing current agricultural public policies could deliver multiple benefits for people, the planet, and the economy. ‘Repurposing Agricultural Policies and Support: Options to Transform Agriculture and Food Systems for Better Health of People, Economies and Planet’ reveals that investing in climate-smart innovations that both increase agricultural productivity and reduce greenhouse gas emissions could reduce overall emissions from agriculture by more than 40%, restore 105 million hectares of agricultural land to natural habitats, and reduce the cost of healthy foods, thereby also contributing to better nutritional outcomes. To achieve this, concerted action is needed, including support to low- and middle-income countries, facing fiscal constraints, to review current policies and prioritize green investments.

As experts and Ministers of Agriculture meet this week for the annual Global Forum for Food and Agriculture hosted by the German government, the report also notes that current policies only return 35 cents to farmers for every US dollar of public support. According to modeling conducted by the authors, redirecting about $70 billion a year, equivalent to 1% of global agricultural output, would improve economic efficiency and result in net gains to the global economy of about $2.4 trillion in 2040.

“Agricultural policies and public support programs are ripe for change. Policymakers are well-placed to scrutinize and rethink current policies and programs to better benefit farmers, increase food security, build resilience in the face of climate change, and reduce greenhouse gas emissions,” said Martien van Nieuwkoop, Director of the Agriculture and Food Global Practice at the World Bank.

Under a “business-as-usual” scenario, the report estimates that greenhouse gas emissions from agricultural production will double by 2040, with 56 million hectares of new land being used for agriculture between 2020 and 2040. However, there are important trade-offs for policymakers to consider as they seek to reform agricultural support policies to achieve better outcomes.

For example, the report finds that simply eliminating support would lower farm output and increase poverty while generating only modest climate gains. Making support conditional on more environmentally friendly but lower-yielding production methods can generate climate benefits, but would increase food prices and poverty, while expanding agricultural land use.

The most effective repurposing, therefore, requires policy incentives and public investment in technologies that both reduce emissions and enhance productivity to meet growing demand for food and ensure food security. These technologies include feed supplements that reduce livestock emissions while increasing productivity, and rice production systems that use less water and produce less methane, without compromising farmers’ incomes and yields.

International collaboration will be vital. “Everyone must come together to reset current policies if we are to address the threats of climate change and unsustainable food systems. Together we can build better food systems and progress towards shared development goals, if we start reforming our public policies now,” said Johan Swinnen, Director General of IFPRI and Global Director for Systems Transformation, CGIAR.

The World Bank is working with governments to rethink and transform food systems, including redirecting public support to produce better outcomes, foster innovation and enable sustainable growth. Building on policy analysis by IFPRI, the World Bank is helping several countries assess the trade-offs and benefits of different policy options, to identify the best path forward for reform.

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