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Trade Pact Could Boost Africa’s Income by $450 Billion

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The African Continental Free Trade Area (AfCFTA) represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion, a new World Bank report has found. If implemented fully, the trade pact could boost regional income by 7% or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.

The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.

Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalization accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 percent, or about $153 billion. The remainder—$292 billion—would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.

Successful implementation of AfCFTA would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would provide a path for integration and growth-enhancing reforms for African countries. By replacing the patchwork of regional agreements, streamlining border procedures, and prioritizing trade reforms, AfCFTA could help African countries increase their resiliency in the face of future economic shocks.

“The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans,” said Albert Zeufack, the World Bank’s Chief Economist for Africa. “The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers –women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”

According to the report, the agreement would reshape markets and economies across the region, leading to the creation of new industries and the expansion of key sectors. Overall economic gains would vary, with the largest gains going to countries that currently have high trade costs. Côte d’Ivoire and Zimbabwe—where trade costs are among the region’s highest—would see the biggest gains, with each increasing income by 14 percent. AfCFTA would also significantly boost African trade, particularly intraregional trade in manufacturing. Intra-continental exports would increase by 81 percent while the increase to non-African countries would be 19 percent.

Implementation of the agreement would also spur larger wage gains for women (an increase of 10.5 percent by 2035) than for men (9.9 percent). It would also boost wages for skilled and unskilled workers alike—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.

This report is designed to help countries implement policies that can maximize the agreement’s potential gains while minimizing risks. Creating a continent-wide market will require a determined effort to reduce all trade costs. This will require legislation to enable goods, capital, and information to flow freely and at easily across borders. Countries that do so will be able to attract foreign investment and increase competition that can increase productivity and innovation by domestic firms. Governments will also need to prepare their workforces to take advantage of new opportunities with new policies designed to reduce the costs of job-switching.

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MDBs’ Annual Climate Finance Passes $61 Billion

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Climate financing by seven of the world’s largest multilateral development banks (MDBs) totaled $61.6 billion in 2019, with $41.5 billion (67%) in low- and middle-income economies, according to the 2019 Joint Report on Multilateral Development Banks’ Climate Finance.

In addition to its traditional focus on low- and middle-income countries, the 2019 report expands the scope of reporting for the first time to all countries of operations.

Some $46.6 billion, or 76% of total financing for the year, was devoted to climate change mitigation investments that aim to reduce harmful greenhouse gas emissions and slow down global warming.

The remaining $15 billion, or 24%, was invested in adaptation efforts to help countries build resilience to the mounting impacts of climate change, including worsening droughts and more extreme weather events from extreme flooding to rising sea levels.

The report combines data from the Asian Development Bank (ADB), the African Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the World Bank Group and—for the first time—the Islamic Development Bank, which joined the working group in October 2017. In 2019, the Asian Infrastructure Investment Bank also joined MDB working groups, and its data is presented separately in the report.

Additional climate funds channeled through MDBs—such as from the Climate Investment Funds, the Global Environment Facility Trust Fund, the Global Energy Efficiency and Renewable Energy Fund, the European Union’s Funds for Climate Action, and the Green Climate Fund—also play an important role in boosting MDB climate financing. In 2019, the MDBs reported a further $102.7 billion in net climate cofinancing from public and private sources. This raised the total climate activity financed by MDBs in 2019 to $164.3 billion.

“The growing flow of MDB climate finance shows our joint resolve to take on climate change and, in the face of the coronavirus disease (COVID-19) pandemic, it is more important than ever to ‘build back better’ in a low carbon and climate resilient way,” said the Director General of ADB’s Sustainable Development and Climate Change Department Woochong Um. “The report shows that climate finance provided by and through the MDBs is providing increasing support for these needed transitions.”

In 2019, ADB committed almost $7.1 billion in climate finance (more than $5.5 billion for mitigation and $1.5 billion for adaptation). This included $705 million from external resources, including multilateral climate funds. Further, ADB mobilized $8.8 billion of climate cofinancing.

The report shows that the MDBs are on track to deliver on their increased climate finance commitments. In 2019, the MDBs committed their global annual climate financing to reach $65 billion by 2025—with $50 billion for low- and middle-income countries—and that MDB adaptation finance would double to $18 billion by 2025. The MDBs have reported on climate finance since 2011, based on a jointly developed methodology for climate finance tracking.

The 2019 Joint Report on Multilateral Development Banks’ Climate Finance is published in the midst of the COVID-19 pandemic, which has caused significant social and economic disruption, temporarily reducing global carbon emissions to 2006 levels.

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Public Transport Can Bounce Back from COVID-19 with New and Green Technology

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Public transport must adapt to a “new normal” in the wake of the coronavirus disease (COVID-19) pandemic and adopt technologies that will render it more green and resilient to future disasters, according to a new report by the Asian Development Bank (ADB).

The report, Guidance Note on COVID-19 and Transport in Asia and the Pacific, details the profound impact of the pandemic on transport, as swift lockdowns forced millions this year to work from home overnight, schools to shift to e-learning, and consumers to flock to online shopping and food delivery.

While public transit may have been previously perceived as a mostly green, efficient, and affordable mode of travel, initial trends in cities that have re-opened have indicated that public transit is still considered to be relatively unsafe and is not bouncing back as quickly as the use of private vehicles, cycling, and walking.

“The two key challenges ahead are addressing capacity on public transport to maintain safe distancing requirements, and how best to regain public confidence to return to public transport,” said Bambang Susantono, ADB Vice-President for Knowledge Management and Sustainable Development. “In the short term, more effort is needed to reassure public transport users of safety and demonstrate clean and safe public transport. In the longer term, technological advances, big data, artificial intelligence, digitalization, automation, renewables and electric power can potentially offer fresh innovations to tackle changing needs, giving rise to smarter cities.”

While drastic lockdown measures around the world have brought world economies to their knees, satellites have recorded data on how the concentrations of CO2 and air pollutants have fallen drastically, bringing clear blue skies to many cities.

But as cities have reopened, traffic levels have increased. For example, Beijing traffic levels, by early April 2020, exceeded the same period in 2019. If this trend is seen on a wide scale, it could set back decades of effort in promoting sustainable development and more efficient means of urban mobility.

The report says there is a short window of opportunity for cities to promote the adoption of low-carbon alternatives to lock-in the improved air quality conditions gained during the peak of the pandemic lockdown. Public transport can play an important role through more active promotion of clean vehicles, provision of quality travel alternatives in public transport, and a better environment for non-motorized modes such as walking and cycling to enhance overall health and wellbeing.

The confidence of passengers on public transport should be restored through protective measures such as cleaning, thermal scanning, tracking and face covering, the report says. Further study to explore how protective and preventive measures can be stepped up to allow relaxation of safe distancing requirements would help mitigate capacity challenges. A possible future trend may be consolidation of services and rationalization of routes to better serve the emerging travel demand patterns and practices.

As countries enter the “recovery” phase, further preventive and precautionary operating measures and advanced technology should be implemented to enable contactless processes and facilitate an agile response. Demand management measures can facilitate crowd control in public transport systems and airports. As a complementary measure, non-motorized transport capacity could be expanded to absorb spillover demand from public transport.

Since mass public transport is the lifeblood of most economies, government policies and financial support are essential during this period, to enable public transport operators to stay viable and continue to support the movement of passengers and goods in a sustainable way.

For ADB, which committed last year $7 billion to the transport sector, behavioral trends linked to COVID-19 may require a review of the short-term viability of passenger transport and operational performance to meet changing demand for public transit systems. “Regardless of the COVID-19 pandemic it is clear that developing Asia will continue to have a large need for additional transport infrastructure and services,” the report concludes. “It would take several years before the projects currently in the pipeline would be operational and much can happen during these years.”

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Zero emission economy will lead to 15 million new jobs by 2030 in Latin America and Caribbean

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In a new groundbreaking study , the Inter-American Development Bank (IDB) and the International Labour Organization (ILO) show that the transition to a net-zero emission economy could create 15 million net new jobs in Latin America and the Caribbean by 2030. To support a sustainable recovery from the COVID-19 pandemic , the region urgently needs to create decent jobs and build a more sustainable and inclusive future.

The report finds that the transition to a net-zero carbon economy would end 7.5 million jobs in fossil fuel electricity, fossil fuel extraction, and animal-based food production. However, these lost jobs are more than compensated for new employment opportunities: 22.5 million jobs are created in agriculture and plant-based food production, renewable electricity, forestry, construction, and manufacturing.

The report is also the first of its kind to highlight how shifting to healthier and more sustainable diets, which reduce meat and dairy consumption while increasing plant-based foods, would create jobs and reduce pressure on the region’s unique biodiversity. With this shift, LAC’s agri-food sector could expand the creation of 19 million full-time equivalent jobs despite 4.3 million fewer jobs in livestock, poultry, dairy and fishing.

Moreover, the report offers a blueprint on how countries can create decent jobs and transition to net-zero emissions. This includes policies facilitating the reallocation of workers, advance decent work in rural areas, offer new business models, enhance social protection and support to displaced, enterprises, communities and workers.

Social dialogue between the private sector, trade unions, and governments is essential to design long-term strategies to achieve net-zero emissions, which creates jobs, helps to reduce inequality and delivers on the Sustainable Development Goals .

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