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Conflict and mass displacement increase child labour

MD Staff

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A new multi-organizational report finds that conflict and war over the past decade has coincided with an increase in child labour among refugee children, the internally displaced and other populations across the region.

Commissioned by the League of Arab States (LAS) and the Arab Council for Childhood Development (ACCD), the “Child Labour in the Arab Region: A Quantitative and Qualitative Analysis ” report is the first to provide an overview of the profile and trends of child labour in the League’s 22 member states. “Over the past ten years, during which the region has witnessed high levels of armed conflict resulting in the mass displacement of populations – both within and between countries – the situation has certainly worsened,” the report states.

A dearth of systematically and comprehensively-collected regional data from previous years means that exact figures on the recent rise of child labour among different population groups are difficult to assess, explained Frank Hagemann, Deputy Regional Director for Arab States from the International Labour Organization (ILO). The ILO is the lead UN agency that oversaw production of the study, in partnership with the Food and Agriculture Organization of the United Nations (FAO).

“Yet the report makes clear that the effects of recent economic shocks, political turmoil, conflict and war have worsened pre-existing levels of child labour, and have also reversed much of the progress Arab countries made in combatting child labour through policy development and practical measures,” Hagemann said. “As is the case across the globe, conflict has hit women and children disproportionately hard in the region. In consequence, child labour has emerged as perhaps the most critical child-protection issue in the region, requiring our urgent attention and action,” Hagemann said.

Worst forms of child labour

The study reports that children in parts of the Arab region “have been increasingly drawn into the worst forms of child labour and face serious and worrying exploitation, abuse and violation of their rights.”

“Refugee and displaced children work in different sectors of activity, with a notable rise in street work, bonded labour, early marriages, and commercial sexual exploitation. Child labour among refugee and displaced children is mainly a coping mechanism for their families who face extreme poverty or where adults are unemployed,” the study states.

The case of hazardous work in agriculture

“The worst forms of child labour include the kinds of hazardous work found in the agriculture sector, in which most children in the Arab region work in both paid and unpaid labour,” said Abdessalam Ould Ahmed, FAO assistant Director-General and Regional Representative for the Near East and North Africa. “Such labour takes place mostly in rural areas, and represents a cheap workforce for small-scale farming – mostly non-mechanized labour-intensive methods of production involving high risks.”

Conflicts and mass displacement had a toll on agriculture and food security. Building resilient rural livelihoods is essential to child labour reduction in this sector, which generally involve high level of work related fatalities, non-fatal accidents and occupational diseases.

“Agriculture accounts for more than half of children in employment in countries such as Yemen, Sudan and Egypt. The predominance of agriculture calls for special attention since this sector is characterized by early entry into work compared to other sectors,” Ould Ahmed added.

Mass displacement and armed conflict

The worst forms of child labour are also found in services and industry, and includes the multiple dangers associated with working on the streets.

They also include direct and indirect involvement in armed conflict and in situations associated with armed conflict.

The study reports that over half of Arab countries are currently affected by conflicts or inflows of refugees and internally displaced persons (IDPs). These include Iraq, Jordan, Lebanon, Libya, Somalia, Sudan, Syria, Tunisia, the Palestinian West Bank and Gaza Strip, and Yemen.

The study reports a rise in the recruitment and use of children by armed groups, both among local and refugee populations, especially in Yemen, Syria and Iraq.

“The majority of recruited children are generally boys. However, there is an emerging tendency to recruit more girls and children below the age of 15. Hundreds of children across the Arab region are also held in detention and even tortured on grounds of being involved in armed groups,” the report states.

Children in parts of the region are being forced into new types of activities relating to situations of armed conflict, such as smuggling goods across the border or between fighting zones, collecting oil waste, performing funerary work (collecting body parts for burial), as well as fetching water or collecting food from fields and landfills littered with explosive remnants of war, the report adds.

Children’s involvement in employment varies substantially across the Arab region, with Sudan and Yemen showing the highest rates of child employment (19.2 per cent and 34.8 per cent respectively.)
Child employment rates are higher among boys. The report cautions, however, “surveys might fail to capture hidden forms of child labour among girls, such as domestic work and unpaid household services, which merit further research and enquiry.” Unpaid work is also higher amongst the younger age group, and in rural areas.

Endorsement and recommendations

The report was presented to LAS member states, who had previously endorsed the report, at the League’s headquarters in Cairo on 7 March. LAS commissioned the report to provide an understanding of the main trends of child employment as a first step towards designing better-targeted policies and interventions to address the problem of child labour. The commission was based on a recommendation of the 20th Session of the Arab Childhood Committee (ACC) of November 2014.

The report stresses, “There is an urgent and immediate need to safeguard children in the Arab region, whether their serious exploitation is a result of pure economic issues or in combination with conflict and displacement. Arab countries need to realize that child labour poses immediate and future challenges not only to the children themselves, but also to their nations and communities, as well as the broader economy.”
“It is now urgent to address both the root causes and repercussions of child labour, and to ultimately eliminate it, especially in its worst forms,” the report states.

The study concludes with recommendations to the 22 LAS member states to improve their governance frameworks, especially by aligning national legislation with international legal standards, and ensuring the effective enforcement of child labour laws and regulations.

It recommends, secondly, protecting children from economic and social vulnerability by improving the socio-economic circumstances of families so that they do not resort to child labour to generate income for households where adults suffer from poverty and unemployment. Achieving this requires improved labour market policies, social protection, access to basic services including education, and awareness-raising programmes.

The study recommends, thirdly, protecting children from the impact of armed conflict through humanitarian programmes and aid for refugees and the displaced, protecting children from recruitment and use in armed conflict, and rehabilitating and reintegrating children used in armed conflicts.

ILO

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China needs further reforms to make growth sustainable, greener and more inclusive

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The Chinese economy continues to slow as it rebalances, with headwinds including trade frictions and the weakening global economy undermining exports and creating new uncertainties. Policy should focus on long-term strategies to move the economy towards greater domestic consumption and services, enhancing economic efficiency and ensuring that future growth is sustainable, greener and more inclusive, according to a new report from the OECD.

The latest OECD Economic Survey of China looks at the factors behind the economic slowdown as well as policies that can boost the quality of future growth and ensure that it is more equitably distributed. Despite the slowdown, the Survey projects growth above 6% this year and next, and sees continuing convergence with more advanced economies.  

The Survey, presented in Beijing by OECD Deputy Secretary-General Ludger Schuknecht, underlines the rising financial risks from high corporate debt and recommends that China prioritises the creation of a single product and labour market to boost productivity and inclusiveness.

“China continues to be the major driver of world economic growth and convergence with advanced economies continues, despite the slowdown,” Mr Schuknecht said. “Yet China is at a crossroads, facing serious domestic and external challenges to maintaining its strong position over the long-term. Policy should seek to ensure a better functioning economy that delivers stable and inclusive growth for all.”

The Survey underlines the need for more balanced trade and investment. Policy should aim to further lower import tariffs and dismantle non-tariff barriers and barriers on the entry and conduct of foreign firms, in particular requirements to form joint ventures or transfer technology.

While much has been done to address financial risks, China’s ongoing fiscal stimulus should avoid directing credit to state-owned enterprises and local governments, the Survey said. Debt ceilings should take into account sub-national government revenues.

Prudent fiscal policy should channel funds to areas where returns are highest, such as education, health and social security systems, while avoiding misallocation of capital by allowing banks to better price risks. Risk perception could be sharpened by orderly defaults. The quality, coverage and timeliness of fiscal reporting can be improved, the Survey said.

The Survey sees wide scope to improve efficiency across the economy, notably by reducing the internal barriers that hinder product market competition and labour mobility. Strengthening the rule of law, restricting the power of administrative departments and providing clear and detailed implementation rules limiting their discretionary powers would reduce protectionism at the local level. Anti-monopoly rules and enforcement can be strengthened and public procurement processes could be made more transparent, technology-neutral and open to all players.

Other measures to boost economic efficiency highlighted by the Survey include stronger protection of intellectual property rights; gradual removal of implicit guarantees to state-owned enterprises, allowing them to default; and reduction of state ownership in commercially-oriented, non-strategic sectors.

To ensure equal opportunities, the Survey recommends China to distribute more evenly high-quality education and health care in order to reduce incentives to move to mega-cities. Gradually easing restrictions on access to public services for city residents without the hukou (residency permit) and eventually delinking service provision from the hukou would also help improve equity. Centralised financing of key spending items, such as wage bills in education and health, reforms to the floor and ceiling for social security contributions and wider tax reform should be pursued.

To make growth greener, the Survey suggests China enforce environmental regulations more strictly, raise fines for polluters and boost environmental taxation, particularly on fossil fuels. Putting an end to the construction of coal-fired power plants and increasing investment in pollution treatment facilities, urban water treatment and rural sanitation is also necessary.

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Bhutan’s Economy to Moderately Grow in 2019 and 2020 on Strong Hydropower and Tourism Outlooks

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Economic growth in Bhutan is forecast to strengthen moderately, buoyed by the industry and services sectors, according to a new Asian Development Bank (ADB) report.

The Asian Development Outlook (ADO) 2019, ADB’s flagship annual economic publication, forecasts the economy to grow at 5.7% this year and 6.0% in 2020. This is following the slipping of growth for a second year running to 5.5% in fiscal year (FY) 2018 on slower hydropower construction and temporary decline in electric power production.

“The expected commissioning of the Mangdechhu hydropower plant, strengthening of private spending, and increased government spending following the formation of a new government to implement the Twelfth Five-Year Plan will greatly contribute to growth,” said ADB Country Director for Bhutan Ms. Kanokpan Lao-Araya. “Inflationary pressure is anticipated following the recent announcement of expected pay rise of the public servants in Bhutan. A downside risk to growth forecasts would be any further delay in commissioning or lower-than-expected production capacity of the Mangdechhu hydropower plant.”

Inflation is expected to rise moderately from 3.6% in FY2018 to 3.8% in FY2019 before edging up to 4.0% in FY2020 as initial benefits from India’s goods and service tax (GST) taper and Indian inflation trends higher. Lower international oil price forecasts will help keep inflation at bay, but the planned revisions to civil service salaries and minimum wage might push up inflation, once implemented.

Current account deficit will continue to narrow further to a forecast of 16.9% of gross domestic product in FY2019, mainly on declining imports with the slowing of hydropower construction and a 6-month hiatus in capital expenditure as the country transitioned to a new administration. It is expected to shrink further in FY2020, as higher imports because of the picking up of government investment is offset by high export revenue from the full-year operation of the Mangdechhu hydropower plant.

Strengthening domestic resources toward better funding of development remains a challenge. With the expected graduation of Bhutan from the United Nations’ least developed country status in 2023, access to concessional official development assistance will increasingly be limited. Reforms have been undertaken to strengthen the mobilization of revenues to fund development. These include the creation of a stabilization fund to ensure even distribution of expenditure, a GST regime which is planned to be adopted in 2020, and reforms on provision of fiscal incentives. Fiscal incentives have been costly for the government with forgone revenue amounting to 17% of tax collected in 2017 only. Reduction of fiscal incentives, particularly tax reforms could be explored to raise government revenues, discourage the entry of footloose opportunists, while not deterring investors who see solid business opportunities in the country. Further, Bhutan needs to simplify the provision and administration of incentives without compromising the level of investment. As a complement to revenue reforms, public financial management needs further strengthening to ensure the proper collection and administration of revenue.

ADB has been supporting Bhutan since 1982, with strong emphasis on renewable energy production, transport connectivity, and key urban infrastructure projects. ADB has committed loans totaling $534.06 million, grants worth $269.22 million, and technical assistance amounting to $53.75 million for Bhutan. In 2018, it approved four projects, including two grant projects focusing on human resource development, particularly on skills and health development. Overall assistance aims to help generate revenue, support inclusive growth, and promote environmental sustainability.

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SMEs turning to alternative financing instruments as growth slows in bank lending

MD Staff

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Small and medium-sized enterprises (SMEs) are turning to non-bank financing sources at a faster pace than in the past, as bank lending to them has risen less than expected given today’s favourable credit conditions and business environment.

Financing SMEs and Entrepreneurs 2019: An OECD Scoreboard finds that online peer-to-peer lending and equity crowdfunding increased significantly in 2017, especially in countries with small markets. China, the United Kingdom and the United States continued to have the biggest online alternative finance markets for businesses. Venture capital investments were up in most countries, and the number of SME listings expanded by more than 13% in 2017, with total SME market capitalisation up 16.7%.

SMEs and entrepreneurs constitute the backbone of OECD economies, accounting for 60% of total employment and 50-60% of value added. They are key to strengthening productivity, delivering inclusive growth and helping economies adapt to changes like the digital transition, ageing populations and the changing future of work. This eighth annual edition of the OECD’s SME financing Scoreboard provides data on debt, equity, asset-based finance and financing conditions in 46 countries and an overview of policy measures to ease SMEs’ access to finance.

“Uptake of alternative financing instruments by SMEs is growing like never before, while bank lending to SMEs is growing less strongly. We need to monitor these developments closely to ensure that SMEs are well-equipped to invest and contribute to productivity growth,” said OECD Secretary-General Angel Gurría, launching the Scoreboard in Washington alongside Chilean Central Bank Governor Mario Marcel on the margins of the IMF/World Bank Spring meetings.

“Policy makers around the world have a key role to play to increase SME access to a diverse set of financing instruments. We are glad that the policy initiatives of the government of Chile are successfully strengthening access to credit and equity for SMEs, and reducing payment delays,” said Governor Marcel.

The 2019 Scoreboard finds that asset-based financing also grew, with leasing and hire purchase activities up by a median rate of 6.2%.

SME loans grew at a median of close to 5% in a majority of middle income countries in 2017, while SME lending stagnated in the United States and the United Kingdom, and fell in European countries most affected by the financial crisis over the same period.

Credit conditions and interest rates remained favourable. The median value of the average interest rate charged to SMEs fell for the 7th year in a row, and SME bankruptcies dropped for the fourth consecutive year in 2017. On the other hand, some segments of SMEs continued to face difficulties in accessing finance. This is the case in particular for micro-enterprises, innovative ventures, start-ups and young firms.

Countries continued to do more to foster SME access to bank and alternative sources of finance by adapting regulations and introducing targeted policies to support Fintech. Credit guarantees, the most widespread instrument to ease SMEs’ access to finance, have been expanded in scale and volume, and better targeted to specific firms. The OECD is working to further expand the evidence base on SME access to finance and support governments in improving their policies in this area.

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