GENEVA, Oct (IPS)–Although it remains the fastest growing region, Asia is already experiencing an economic slowdown, with gross domestic product (GDP) expected to fall from 6.8 percent in 2011 to slightly below six percent in 2012. Several countries – including China, India and Turkey – have been adversely affected by weaker demand from developed countries.

Supachai Panitchpakdi

Given the headwinds from the international economy, some developing countries have since relaxed their monetary conditions and many of them have applied countercyclical measures that are helping to boost household incomes and to maintain a much needed shift from external to domestic demand, alongside the role of investment.

China, for example, has played a critical role in global rebalancing, being the chief engine of world growth since 2009 and having reduced its surplus markedly (from 10 percent of GDP in 2007 to two percent in 2012) as it shifted its economy towards domestic demand.

In China and other major economies in the region, however, internal rebalancing remains unfinished as private consumption should take on a greater role relative to investment. High wage growth will help to support this goal as well as helping to promote further external rebalancing.

High and volatile commodity prices also present a risk to the rebalancing process for the Asian region, because they can be a drag on growth. Rising oil prices, for example, act as an immediate dampener on aggregate spending in fuel-importing countries, contracting spending more or less immediately, whereas any spending expansion from fuel-exporting countries occurs only after a lag.

However the main risk continues to be concentrated in the developed economies, where the United Nations Conference on Trade and Development (UNCTAD) has long been concerned that premature and excessive fiscal austerity is choking recovery and growth unnecessarily. The developing economies in Asia have played a major role stoking the engine of growth since the crisis, but this could be derailed if there continues to be a decline in consumer demand from their traditional markets in the advanced economies, and the effects of a reduction in this demand would of course have further spill-over effects if it provoked a downturn in Asian household and investment demand.

The second aspect of the rebalancing has occurred after the crisis. Global trade rebalancing has been largely due to the decrease in China’s exports and the increase in its domestic demand. Trade imbalances for many other East and South-East Asian (ASEAN) countries have not altered significantly. In 2011, the trade surplus of ASEAN as a whole had recovered to its 2007 level and it is currently similar in size to that of China, at about 100 billion dollars.

The rebalancing of the last three years has been due to a number of factors: the worsening terms of trade, especially for China, the decrease in international demand for products collaboratively (vertically) produced by East Asian countries, and the increase in domestic demand in China.

In practice, while China’s trade surplus is largely related to its trade with high-income markets, that of other East Asia countries is largely owing to trade with China. Indeed, the trade surplus of ASEAN countries with China has been increasing in the recent years.

The implications of this rebalancing are largely related to Chinese imports from the region. In this regard, the increase in Chinese domestic demand and the weak international demand for Chinese manufactures are resulting in a shift in the composition of Chinese imports. In practice, China imports relatively fewer goods to fuel its export sectors, and more consumption goods to meet the increasing domestic demand.

In this context, regional partners serving the Chinese export industry (those with vertical supply chain links with China) are likely to continue to be negatively affected as long as demand for Chinese exports remains weak. On the other hand, regional firms serving the Chinese domestic markets are likely to show continuous growth. However, a caveat is that China’s demand for final goods is still largely met by domestic producers, and thus the increase in domestic demand may not have large external spillovers.

A reduction in international demand for Chinese exports may also accelerate the transformation of the Chinese manufacturing industry towards higher value-added goods. This clearly depends on the extent to which Chinese firms are able to upgrade along the value chain and to capture market share in these segments.

If (or when) this occurs, it may have repercussions for the vertical integration of production processes in the region. In practice, Chinese firms could turn from vertically integrated partners into competitors of firms in more advanced countries. On the other hand, the process of manufacturing upgrading may benefit less advanced economies in the region, which are presently competitors of Chinese firms.

Ultimately, what is most important is that regional markets remain open, so that rising domestic demand in each country is met not only by domestic enterprises but also by those operating in other countries of the region. (END/COPYRIGHT IPS)

* Supachai Panitchpakdi is the secretary-general of the United Nations Conference on Trade and Development (UNCTAD).

Direct benefits of Cape Town’s MyCiTi early phase Bus Rapid Transit system are skewed in favour of middle rather than lower income residents. Credit: Gail Jennings/IPS

CAPE TOWN, South Africa, Oct 2 2012 (IPS) - In South Africa, Bus Rapid Transit systems, which were pioneered to great effect in Latin American countries such as Colombia and Brazil, are being promoted as potentially effective ways of delivering improved public transport services to the urban poor. But experts question whether systems such as these can alleviate poverty to any meaningful extent.

Bus Rapid Transit, sometimes referred to as “rail on road” systems, are high-quality, high-capacity bus systems with their own right-of-way, dedicated bus lanes.

Today the TransMilenio in Bogota, Colombia carries around 1.6 million passengers every day, over 84 kilometres of segregated busway. In Curitiba, Brazil, about 70 percent of commuters use the BRT, and around 30 percent of passengers are “converted” private car users.

It is upon purportedly transformative systems such as these that the cities of Johannesburg, Tshwane and Cape Town in South Africa, Lagos in Nigeria and Nairobi in Kenya have pinned their transport hopes and dreams.

Early phases of multi-million dollar capital projects are operating in Johannesburg and Cape Town, and are set to soon launch in at least four other cities in South Africa.

But while it is too early to draw long-term conclusions about the impact of these transport systems, a number of researchers are asking questions and coming up with some answers about their ability to contribute to national goals of alleviating poverty.

James Chakwizira, a senior researcher in the built infrastructure department at the Council for Scientific and Industrial Research (CSIR), told IPS that although these high-quality services do have great potential for addressing public transport challenges within communities, the current initiatives such as Johannesburg’s three-year-old system, Rea Vaya, fall short of expectations.

He said because terminal infrastructure developments are located away from the marginal communities’ location, people from these areas need to use a minimum of two transport modes in order to access and use the routes.

Councilor Rehana Moosajee, who is on the Mayoral Committee Member for Transport for the City of Johannesburg, and is a Rea Vaya champion, told IPS that initially one of the key imperatives of the Rea Vaya system was to overcome apartheid’s spatial legacy and promote access and social cohesion.

“I think that now a lot more work will have to be done over a period of time in assessing impacts on poverty, as based on the city’s own multiple deprivation indices, the areas of highest multiple deprivation are further south of Soweto – a township to the south of Johannesburg – and therefore not yet reached by the service.

“Our own experience suggests that Rea Vaya commuters are certainly saving time, though, and we have also had some interesting accounts of property availability and take-up on certain parts of routes and the creation of economic activity,” she said.

At a December 2011 conference on Land Passenger Transport, Karen Lucas, an international researcher on transportation equity, supported the implementation of BRT to the extent that “these major infrastructure projects are needed to bring high quality, modern and efficient mainstream public transport services to inner cities.”

However, she noted “these services will serve only a minority of the travel needs of urban populations.”

Research released in July by the University of Pretoria’s Christo Venter and Eunice Vaz reached a similar conclusion. Using data from a small-sample household survey conducted in Soweto, they found that the time and cost benefits of the system “accrue largely to medium-income households rather than to the poorest commuters in the area.”

“To the extent that passengers can spend time and fare savings on other goods, Rea Vaya contributes to poverty reduction,” they found. The researchers also noted that Rea Vaya is priced higher than the cheapest available public transport alternative, commuter rail, which remains the mode of choice for the poorest commuters.

The average travel cost for Rea Vaya users comes to R10.20 (about 1.24 dollars) per one-way trip to work, as compared to R11.70 (about 1.42 dollars) for other modes of transport like mini-bus taxis, which most people used to take before Rea Vaya.

Overall, the direct benefits of Rea Vaya are skewed in favour of middle- rather than lower-income residents, the researchers concluded. They suggested that more specific targeting was needed for the BRT to deliver significant poverty reduction benefits.

The situation is similar with the City of Cape Town’s MyCiTi early phase BRT service.
African Centre of Excellence for Studies in Public and Non-motorised Transport (ACET) researchers Lorita Maunganidze and Romano Del Mistro used ACET Household Survey data to conclude that MyCiTi might not be of value to poor commuters.

“While poor commuters may benefit from more accessible, frequent and fast BRT services, ironically, these will be more expensive and in some cases unaffordable to them and therefore of no benefit,” the researchers said.

They recommend that the routing structure be revised and rationalised to make in-vehicle and trip distances shorter, particularly for the poor commuters who face the longest commuting distances and times; and that local BRT be tailored more specifically to work within the South African environment or under South African conditions.

Councilor Brett Herron, City of Cape Town’s Mayoral Committee Member for Transport, Roads and Stormwater, told IPS that it is not possible to look at the impact of a new BRT service on poverty, or on poor communities, in isolation from the entire public transport network.

“BRT is just one mode of transport and this mode alone cannot have expansive direct economic benefits to poor communities … BRT trunks alone are not going to bring about the level of change we require in order to universally benefit the urban poor.

“We will seriously address poverty only when we piece together all the complicated components of this puzzle; public transport is one piece – with changed land use, densification, transit-orientated development, all responding to new or improved public transport corridors, we will start to bring people to opportunities and take opportunities to people.”

Pauline Froschauer, project manager for Rustenburg Rapid Transport, which is currently in the construction phase, told IPS that instead of poverty alleviation, a transport project such as a BRT should be measured against what is usually its primary objective: the effect it has on levels of mobility and accessibility.

“At best one could say that by improving mobility and accessibility, there are positive ‘externalities’, such as city development, local economic development and poverty alleviation. But to try to measure this in one BRT corridor (such as the Soweto-CBD Rea Vaya) is, I think, misrepresentative. Until one has a reasonable network effect, improved mobility and accessibility will not be achieved.”

NEW DELHI, Sep (IPS/South Centre) Since January 2012, aviation has been included in the European Union’s Emissions Trading Scheme (ETS) that requires aircraft operators to surrender one allowance per tonne of carbon-dioxide emitted on a flight to and from (and within) the EU. This covers passenger, cargo and non-commercial flights and applies no matter where an aircraft operator is based.

Anuradha R.V.

Each such airline would have to comply with a benchmark set by the EU on the basis of its average annual emissions in respect of flights to and from the EU. One of the most controversial aspects of the measure is that it calculates an airline’s emissions from the point of take off; this means that a flight from New Delhi to London, which flies within the EU only for a few hours, would have to account to the EU for its emissions from New Delhi itself. EU’s rationale in putting in place the system is to ensure that its own operators are not at a competitive disadvantage.

The economic impact of the EU-ETS for the global airline industry has been estimated to be 1.5 billion dollars annually, and 13.8 billion dollars through 2020, according to Thomson Reuters Point Carbon. The annual financial impact on major airlines from India has been estimated to be in the range of 30 to 40 million dollars.

The EU system offers airlines some allowances for free, and they are required to purchase the rest at EU auctions. If an airline exceeds the benchmark set for it, it can buy carbon credits from the market. Revenue from the auction of aviation allowances is expected to earn the EU close to 334 million dollars in 2012.

Airlines would simply pass on the enhanced costs of EU-ETS compliance to consumers, and it could indeed be argued that perhaps it is not such a bad thing for international air travellers to pay for their carbon footprint.

However, the EU’s action is essentially a statement that it would take measures on its own to police climate change, disregarding multilateral processes, which impact activity both within its own territory and outside of it.

There are potentially other forms that such unilateral action could take, for instance, through imposition of taxes or other charges on imports, or other non-tariff regulatory requirements, whose impact on goods and services from countries like India could be more severe.

EU-ETS in fact already includes a provision stating that the EU would consider measures for “carbon equalisation”, which could affect imports from countries that do not have comparable emission reduction norms, depending on the outcome of the ongoing multilateral negotiations. The main reasoning seems to be that if multilateral negotiations do not have the effect that EU desires, then EU will impose unilateral measures.

To state the obvious, any unilateralism would make a mockery of the multilateral processes. Under the United Nations Framework Convention on Climate Change (UNFCCC), any unilateral action would run contrary to the principle that only Annex I (developed) countries have quantitative legally-binding emission reduction targets, while other countries have no binding quantitative targets of any kind.

This principle – also referred to as the principle of “common but differentiated responsibilities”, is clearly violated by EU-ETS requirements, which effectively treat Annex I and non-Annex I countries in the same way.

The Kyoto Protocol to the UNFCCC required Annex I countries to pursue reduction of aviation emissions by working through the International Civil Aviation Organisation (ICAO). ICAO resolutions in 2007 and 2010 emphasised that countries should undertake market-based measures relating to aviation emissions only subject to multilateral or bilateral agreements. Such a mandate essentially means that measures such as EU-ETS can be enforced against an aircraft operator from a third country only if the EU has entered into an agreement with such a country. EU-ETS, however, ignores this principle.

As a response to EU-ETS, 23 members of the ICAO (including the U.S., Japan, Singapore, India, China and Brazil) met in February 2012 to condemn EU’s move. These countries have outlined a basket of measures which they would want to explore against the EU, which include:

- filing of an application under ICAO’s convention for resolution of the dispute;

- prohibiting their airlines/aircraft operators from participating in the EU-ETS;

- imposing additional levies/charges on EU carriers/ aircraft operators as a form of counter-measure;

- reviewing Bilateral Air Services Agreements, including Open Skies with individual EU member states;

- suspending current and future discussions and/or negotiations to enhance operating rights for EU airlines/ aircraft operators;

- exploring action under WTO agreements.

Following the above declaration, the governments of China and India have taken the position that their airlines would not comply with EU-ETS. Under the EU directive, non-complying aircraft operators face a penalty of 100 pounds per missing allowance, and also face a potential ban from operating in the EU. The extent to which the stalemate continues, and the extent to which EU will enforce its penalties or even suspend non-complying airlines from entering its airspace, remains to be seen.

As seen from the joint declaration of the countries opposing the EU’s move, the only effect of EU’s unilateral action could be a spate of unilateral measures from other countries.

Will good sense prevail to enable an amicable resolution? Otherwise, between the various unilateral measures – threatened and actual – the only casualty would be climate change. (END/COPYRIGHT IPS)

* Anuradha R.V. is a partner at Clarus Law Associates, New Delhi, and works on law and policy relating to international trade and climate change. For further analysis see Climate Policy Brief, September 2012 (http://www.southcentre.org).

Cristina Fernández and Wen Jiabao in a videoconference with Dilma Rousseff and José Mujica. Credit: Office of the president of Argentina.

BUENOS AIRES, Aug 8 2012 (IPS) - There is little likelihood that South America’s Mercosur trade bloc will take up China’s proposal to establish a free trade agreement, at least in the short term. Experts and industrialists fear an invasion of cheap Chinese goods, and unequal competition.

Although the sources consulted by IPS agreed that trade and investment between Mercosur (Southern Common Market) and China will continue to expand, they said a free trade deal was unrealistic under the present circumstances.

Chinese Premier Wen Jiabao expressed interest in such an agreement on his Jun. 25 visit to Buenos Aires, in a videoconference with Presidents Cristina Fernández of Argentina, Dilma Rousseff of Brazil, and José Mujica of Uruguay.

The four leaders welcomed the idea of forging closer trade ties between Mercosur and China.

Paraguay, Mercosur’s fourth founding member, has been suspended from the bloc since that country’s legislature removed President Fernando Lugo in a lightning-quick impeachment trial on Jun. 22.

At any rate, Paraguay is facing the dilemma of maintaining diplomatic relations with Taiwan or agreeing to cut off ties in order to negotiate with Beijing.

The fifth full member of Mercosur, Venezuela, had not yet been admitted to the bloc at the time of the videoconference. It officially joined on Jul. 31 in Brasilia.

At the last Mercosur summit, held in the Argentine province of Mendoza four days after Wen’s visit, the governments of Argentina, Brazil and Uruguay agreed to strengthen cooperation with China.

They also approved a proposal to send a joint trade mission this year to China ‘s commercial hub, Shanghai.

But they did not elaborate on the Asian giant’s suggestion of freeing up trade, which analysts agree will be a long, complex process.

Mauricio Mesquita Moreira, an Inter-American Development Bank (IDB) expert on international trade, said the conditions are not in place for reaching a free trade deal in the near future.

“On one hand, Argentina and Brazil have industries that are highly vulnerable to competition from Asia. And on the other, the state still has too much of an influence in the promotion of industry in the Chinese economy for Mercosur to accept a liberalisation of trade,” the Brazilian economist told IPS.

“The smaller partners, Uruguay and Paraguay, lack industrial structure, and could benefit from an agreement with China. But being in Mercosur also gives them benefits such as privileged access to the bloc’s larger markets,” he said.

Mesquita Moreira was in Buenos Aires this month to present a study carried out by the IDB together with experts from the Asian Development Bank Institute, which analyses the future of ties between Asia and Latin America.

The study recommends an increase in trade and investment between the two regions.

Argentine economist Guillermo Rozenwurcel, director of the Centre for Research on Economic Development in South America (IDEAS), said “the Chinese proposal is not viable in the least, over the next 10 to 15 years.

“The presidents gave a diplomatic response to the Chinese interlocutors, to show that they had listened to the proposal. But until the playing field is level, there are few prospects for real discussions on free trade,” he told IPS.

Rozenwurcel also said there was little “political margin” for considering the question.

On the other hand, “there is a challenging and complex, but possible, outlook” for boosting trade, investment and scientific and technological cooperation between this region and Asia, he added.

According to the study by the IDB and the Asian Development Bank Institute, trade between Latin America and Asia has grown by an average of 20.5 percent a year since 2000, to 442 billion dollars today.

With that sharp increase over the last 12 years, China, Asia’s biggest supplier of imports to Latin America, is now the region’s second largest trading partner, after the United States.

But the pattern of trade between the two regions is based mainly on exports of raw materials from Latin America and sales of manufactured goods from Asia, experts point out.

Abeceb, a private consultancy in Argentina, reported that trade between Mercosur and China climbed from 10.3 billion dollars a year in 2003 to 77.9 billion dollars in 2011, and could reach 200 billion dollars by 2016.

But Abeceb also noted that in the same period, Argentina’s purchases of manufactured goods from Brazil such as textiles, capital goods, plastics or pharmaceutical products fell as a result of competition from lower-cost imports from China.

In the case of textiles, for example, 56 percent of Argentina’s imports came from Brazil in 2003, but today that proportion is less than 23 percent. Meanwhile, purchases of textiles from China grew from two to 34 percent of the total.

And while footwear imports from Brazil fell from 79.2 percent to 37.5 percent between 2003 and 2011, purchases from China rose from 12.6 to 36 percent in the same period.

The president of Argentina’s toy industry chamber, Miguel Faraoni, said a free trade accord between Mercosur and China “would be very counterproductive.”

“Competition is impossible due to the differences between the policies of each one. China produces between 75 and 80 percent of the toys sold around the world, which means it would be an unequal fight,” he said.

Faraoni said the share of locally produced toys sold on the domestic market has gone up from 10 percent in 2002 to 50 percent today. He also noted that the number of foreign companies producing toys in Argentina has increased.

“Production, employment and investment in machinery and new technologies have grown, and we are exporting eight percent of what is produced to the region and to the Latino market in the United States,” he said.

Faraoni stated that Argentine industry could compete in terms of price and quality with Brazil, “which has the same rules of the game,” but that “opening up the market to China would reverse the gains made in the last few years.”

GENEVA, Jun (IPS) India may be famous for the Taj Mahal, its religious ceremonies, Bollywood films and one of the highest economic growth rates in recent years. But more importantly, India has had a positive global impact through its supply of vast quantities of low-cost, good-quality generic medicines, which have saved or prolonged millions of lives.

Martin Khor. Credit: South Center website.

Many people go to India to buy life-saving generic medicines from pharmacies and bring these back in suitcases to give to close relatives who cannot afford the expensive branded original products.

A decade ago, the Indian pharmaceutical company Cipla produced generic HIV/AIDS drugs that could treat a patient for 300 dollars a year, far cheaper than the branded product’s cost of 10,000 dollars per patient a year. Today the Indian generic version is even cheaper, below 80 dollars.

This has enabled millions more AIDS patients to be treated, since India supplies 70 percent of the HIV/AIDS drugs obtained by the United Nations Children’s Fund (UNICEF), the Global Fund and the William J. Clinton Foundation for developing countries.

A further 75-80 percent of medicines (not only for AIDS) distributed by the International Dispensary Association to developing countries come from India. No wonder India has been termed the ‘pharmacy of the developing world’.

In January 2012, the Indian Drug Manufacturers’ Association (IDMA), comprised of 700 drug-manufacturing member companies, celebrated its 50th anniversary, by toasting the industry’s high growth, wide range of medicines, and its contribution to safe, affordable drugs.

But there are also many factors that may hinder the continuation of the company’s role as chief supplier of medicines to developing countries.

A main factor of the industry’s success was the government’s decision, back in 1970, to exclude pharmaceutical drugs from product patents.

This paved the way for local companies to produce generic versions of expensive foreign drugs and within a few decades they had taken over 80 percent of the domestic market, while also supplying cheap medicines abroad.

The situation took a negative turn when the intellectual property agreement, known as TRIPS, was established in 1995 together with the World Trade Organisation, which disallowed countries from excluding medicines from patentability.

However, TRIPS allowed individual countries to determine the criteria for an invention that can be granted a patent. Furthermore, TRIPS gave governments the ability to grant a compulsory licence to local companies to produce the patented products, if their requests to patent owners for a voluntary licence did not succeed.

To implement its TRIPS obligations, India passed changes to its patent law in 2005 so that drugs could now be patented. However, the new law also contained flexibilities such as strict criteria for patentability (trivial changes to a patent-expired product would not qualify for a new patent); allowance for public opposition to a patent application before a decision is made; and compulsory licencing.

India has one of the best patent laws in the world that still gives some space to its producers to make generic drugs. But it is also true that the old policy space has been eroded because many new drugs have, since 2005, been patented by multinational companies that are selling them at exorbitant prices.

Indian companies can no longer make their own generic versions of these new medicines unless they successfully apply to the government for compulsory licences, a most cumbersome process; or unless they obtain a licence from the patent-owning multinational, which comes with stringent conditions, especially for export.

Another worry is that India is negotiating a free trade agreement (FTA) with the European Union. Such agreements usually contain provisions such as data exclusivity and extension of the patent term, which prevents or hinders generic production.

Finally, six Indian companies were recently bought up by large foreign firms. If this trend continues, the Indian drug market may be dominated by multinationals again. It is uncertain whether they will continue to supply the developing world with cheap generic medicines when this may be in conflict with their own branded products.

International health organisations such as UNAIDS, UNITAID and Doctors Without Borders have raised their serious concerns that these recent trends may threaten India’s role as the chief supplier of affordable medicines to Africa and other developing countries.

Millions will die if India cannot produce the new HIV/AIDS medicines in the future –it is a matter of life and death, said Michel Sidibe, executive director of UNAIDS, during a visit to India last year.

Thus, a strategy is needed that involves the government and the drug companies, which ensures that the local drug industry continues to thrive; that it produces not only existing medicines but also new medicines even if they are patented; and that they are supplied at cheap prices not only in India but to the developing world.

That was the sobering message that emerged during IDMA’s 50th anniversary conference in January, even in the midst of congratulations on the achievements of the past. (END/COPYRIGHT IPS)

* Martin Khor is the executive director of the South Centre in Geneva.

Donghyun Park, lead author of the ADB’s 2012 Asian Development Outlook, launched the report at Lowy Institute for International Policy, Sydney / Neena Bhandari/IPS

SYDNEY, Apr 11 (IPS) – While developing Asian countries have experienced robust growth – lifting living standards and reducing poverty – increasing wealth is fuelling income disparities and inequality, posing a major threat to the region’s stability, warns the Asian Development Bank (ADB)’s flagship report released Wednesday.

The Manila-based ADB’s 2012 Asian Development Outlook says if the spoils of growth had been more evenly distributed, another 240 million people in the 45 countries that make up developing Asia would have moved out of poverty in the last two decades.

Widening inequality

Inequality widened in the three most populous countries – the People’s Republic of China, India, and Indonesia—which have been key drivers of the region’s rapid economic growth.

“A high degree of inequality breeds social tensions between the haves and have nots and tends to generate instability. One of the key ingredients of Asia’s economic growth in the past has been social and political stability and if that is jeopardised, it will inevitably undermine economic growth,” Donghyun Park, one of the lead authors of the report and principal economist at ADB’s Economics and Research Department, told IPS.

“Growing inequality also generates pressures for populist and inefficient policies, which again hamper growth.”

For developing Asia, the Gini coefficient – a key measure of income distribution on a zero to one scale, with one representing ‘maximum inequality’ – has leapt from 0.39 to 0.46 in the last two decades. The richest one percent of households accounted for six to eight percent of the total income while close to 20 percent of total income went to the top five percent in most countries.

Technological progress, globalisation, and market-oriented reforms, which have been the primary catalysts for the region’s growth, are said to have been the key forces behind the rise in inequality, particularly between rural and urban areas, and coastal and inland provinces.

“The more educated people are better able to capitalise on technology and that translates to higher income. However, technology can also be deployed to reduce inequality, such as ICT being used to better inform farmers about crops and weather, and ‘e-education’ reaching out to children in remote areas,” Park told IPS.

Unequal access to assets such as capital and land; human capital, such as education and training; and labour and financial markets is common in the region.

The report states that in order to address inequality, policymakers need to spend more on education and health; introduce better targeted social protection schemes; reduce or eliminate general price subsidies; broaden the tax base; create more productive jobs and assist lagging regions.

“Most Asian governments are very much aware that growing inequality is harmful for their country’s growth and social harmony. However, they have yet to take more concrete and specific measures to deal with this issue,” Park observed.

He suggests a closer partnership between governments and civil society groups for more equitable growth and gives the example of the Saemaul Undong (New Village) movement in South Korea. “The community-based movement was kick-started and then supported and partially funded by the government in the 1960s and 1970s as a result of which the rural-urban divide in South Korea didn’t go as high as in many other countries despite the country’s rapid economic growth,” he said.

The report says from a moderate growth of 7.2 percent in 2011, the gross domestic product (GDP) growth in developing Asia will slow to 6.9 percent in 2012 before rebounding to 7.3 percent next year. The region was shifting towards a “more sustainable long-run growth path” based on strong domestic demand.

The People’s Republic of China, the world’s second largest economy, is set to post GDP growth of 8.5 percent in 2012, and 8.7 percent in 2013 after expanding to 9.2 percent in 2011. The pace of India’s growth is projected to edge up to seven percent in 2012 and 7.5 percent in 2013.

’Wildly Optimisic’

But Satyajit Das, an international specialist in financial derivatives and risk management, says the report is “wildly optimistic”. The ADB has cut its forecast from the September projection of 7.5 percent to 6.9 percent.

“I think they have wholly underestimated the downside risks. European problems will get deeper before they get better and that is going to have two effects on Asia: first, the export demand will be much less than anticipated. Secondly, there are countries in Asia, particularly India, (that are) heavily reliant on foreign capital because of their current account deficit and that is going to become more difficult to finance in this particular environment.

“The United States’ recovery is very tepid and their biggest trading partner is Europe. As Europe slows, the U.S. economy is going to slow as well,” he stressed.

Major industrial economies like the U.S., Eurozone and Japan are collectively expected to expand by only 1.1 percent in 2012 and 1.7 percent in 2013.

Das said, “The policy moves that are being taken in developed markets are extremely destructive to Asia. The U.S., the UK, Japan and indeed Europe are now in a mode to monetise their debt and that has several effects on Asia. The first and most direct effect is that all the Asian central bank reserves are held in developed market currencies and there is an enormous loss of wealth is going to occur.”

“The next direct effect is that by pushing down these currencies they are effectively doing two things: One, they are pushing currency upward pressure on the Asian currencies making them less competitive. As most commodities are traded in U.S. dollars, the commodity prices go up (to compensate for the weak currency) and feed inflation in these domestic economies in Asia and that is the basic issue. This is absolutely…willful and malicious,” Das stressed.

The report says that oil-price spikes and volatility in food prices could revive the threat of inflation, but policy makers in developing Asia can refrain from further monetary and fiscal stimulus.

Robust expansion in the resource-exporting economies of Papua New Guinea, Timor-Leste and the Solomon Islands, and strong growth in the tourism-oriented economies of the Cook Islands, Fiji, Palau, and Vanuatu, lifted sub-regional growth to seven per cent in 2011. The Pacific countries have been relatively insulated from the Eurozone crisis.

According to the report, the Pacific is expected to slow to six percent and 4.1 percent over the next two years due to lower resource export revenue, the winding down of infrastructure projects, and lower international agricultural prices.

(END/2012)

SINGAPORE, Apr 10 (IPS) – The rapid currents moving the centre of economic influence towards an emerging global order headquartered in Asia were evident at the PanIIT’s 2012 annual conference of alumni of the highly prestigious Indian Institute of Technology (IIT), which took place in Singapore over the Easter weekend.

The three-day conference hosted a diverse range of top-notch speakers representing global business, academia and the financial sector, expressing their views on developing strategies to navigate the challenging global economic environment and to create sustainable long-term growth.

Except for one Westerner, all the speakers were Asian, mainly Indian, including heads of formidable global businesses, such as Arjun Malhotra, co-founder of Hindustan Computers Limited and chairman of Headstrong USA; Shekhar Mitra, senior vice president of Procter and Gamble USA; R. Gopalakrishnan, director of Tata Sons Limited; and Ho Kwong Ping, executive chairman of Banyan Tree Holdings, Singapore.

Hosting the meeting in Singapore was a first for a group that, since 2002, has convened alternatively in India and the United States. But there are over 1000 IIT graduates who now work in Singapore, many in high profile jobs such as the provost of the new Singapore Management University, Rajendra Kumar Srivastava.

“Most Indians coming here have had significant work experience and they have filled a gap in Singapore’s existing skills,” S.N Venkat, secretary of Strategic Partnerships at the IIT Alumni Association of Singapore, told IPS.

The high regard in which IIT is held in Singapore was reflected in the fact that the country’s former president S.R Nathan is the patron of the alumni association here, and the current president, Tony Tan, was the chief guest at the gala dinner on Saturday night.

In his keynote speech to the conference, S. Iswaran, minister in the Prime Minister’s Office, said the high number of IIT graduates working in Singapore and across Asia “reflects more generally a fundamental shift in the global centre of gravity from the West to the East.”

Iswaran warned that as manpower costs and energy prices rise, and Western currencies weaken, Asia’s advantage as a low-cost manufacturing base will wane.

“Asian economies need to be able to move on to higher value-added economic activities in order to sustain their economic growth. They will have to leverage on design technology and a skilled labour force to create products and services for their own domestic markets, as much as for the rest of the world,” he noted.

This is where Asian institutions like IIT are expected to play a leading role.

A roundtable involving visiting directors of IITs from around India and four local universities discussed possible collaboration efforts, including the long-standing invitation from the Singapore government to set up an IIT campus here.

“As Singapore becomes an educational hub for Asia, especially for Southeast Asia, (our) emphasis is on having institutes of higher learning of global repute to be based here to attract students from the region,” explained Venkat.

Many speakers pointed out that with economic crises in Europe and the U.S. still unresolved, following the western capitalist model blindly is not the right development path for Asia, which should instead develop its own model, utilising traditional practices.

This was a theme reflected in a keynote speech given by Ho Kwong Ping, whose Banyan Tree Holdings has developed a chain of luxury hotels across the world based on Asian tastes and standards.

Still, he warned that Asia’s rise is not predetermined and argued that the continent must produce a basket of intellectual solutions to address Asia’s chronic social inequality.

“China has a deficit of democracy (while) Indian leaders have realised that democracy is not reducing inequality” and both are unable to “move beyond capital reforms,” he noted.

“As Asia continues its dynamic growth we need to delve into our own history and culture for inspiration to develop Asian values of capitalism. One resource could be the webs of mutual obligations which are present in virtually all civilisations of Asia,” argued Ping. “It is possible for Asia to develop this communitarian capitalism, if properly nurtured and developed, as an alternative to the highly individualistic model of American capitalism.”

Ping singled out India’s Tata model of capitalism, which benefits from being “stakeholder driven and not shareholder driven.”

Tata’s Gopalakrishnan told IPS that most Asian businesspeople have been reading books written by Westerners and adopting their ideas only because there are hardly any books written about good practices by Asians.

“The West is…saying we must become conscious capitalists (though) many people in Asia are saying we have always been doing that,” he said.

He said that Tata used its one billion dollar profits to set up a trust to help the poor, “so part of our profits go back to the community.” The Tata group consists of over 100 companies in seven business sectors operating in more than 80 countries around the world.

In the past two decades IIT graduates have been some of the most successful innovators and entrepreneurs in the U.S.’s Silicon Valley. If they turn their attention to the rest of Asia now, experts believe they could make a big difference.

Jignesh Shah, founder chairman and group CEO of Financial Technologies India, a world leader in creating and operating technology-centric financial exchanges, argues that new business models in Asia are opening up.

“It will create huge opportunities for the best brains from Asia like you (graduates of IITs),” he told the conference. “India and China have huge savings rates and if it gets into share markets rather than remaining in banks … Asia will generate the next Goldman Sachs.”

(END/2012)

Fishing boats in Cape Town harbour, South Africa, with Table Mountain as backdrop. Credit: Servaas van den Bosch/IPS

By Ravi Kanth Devarakonda

GENEVA, Mar 30 (IPS) – Brazil and South Africa have experienced a widespread contraction of their manufacturing industries, with the latter suffering massive unemployment as well, thanks to the rampant volatility and misalignment of dominant global currencies like the dollar, trade experts from the two countries say.

“Brazilian industry is at the receiving end of exchange rate appreciation and 2011 saw a negative growth in the manufacturing sector with textiles, leather, chemicals, rubber, and electrical industries, among others, having been adversely affected,” said Josue Gomes da Silva, the chief executive of the Brazilian company, Coteminas. He was speaking at a closed-door seminar at the World Trade Organization (WTO) on Mar. 27.

“Four hundred thousand small businesses closed down in South Africa over the last three years, resulting in unemployment of about 23 to 34 percent due to the unstable exchange rate that made South African exports uncompetitive,” said Stewart Robert Jennings, chief executive of South Africa’s PG Group.

“The South African Rand has strengthened during the last three to four years and is now the most volatile currency,” he said, suggesting that the Brazilian Real and Rand are at their highest appreciation values against the greenback.

Da Silva and Jennings offered a detailed account of the creeping “deindustrialisation” in their respective countries at a closed-door seminar convened by the WTO’s Working Group on Trade, Debt, and Finance.

The two-day seminar, which concluded on Mar. 28, is an outcome of a sustained campaign by Brazil over the last year to persuade members of the WTO to discuss the role played by volatile exchange rates in international trade.

However, several industrialised countries, as well as China, were reluctant to address the issue of exchange rates at the WTO, saying it is part of the International Monetary Fund’s (IMF) agenda. “The seminar is an attempt to give shape to a reality, away from abstract concepts,” Brazil’s trade envoy Ambassador Roberto Azevedo told IPS.

While representatives from the private and public sectors and academia were invited to discuss the role exchange rates played in trade, journalists were barred from the seminar at the insistence of Canada and the United States.

Though there was no consensus on the factors influencing the misalignment of currencies, which imply that there is a gap between a country’s real exchange rate and its equilibrium level, there was general recognition that a problem exists and is playing an adverse role in different countries.

While currencies in big developing countries appreciated significantly over the last few years, in other countries, currencies depreciated or were maintained at a steady peg to the dollar despite favourable macro-economic fundamentals.

The Real is overvalued by 42 percent, while South Africa’s Rand has appreciated in double-digit percentage terms against the dollar. The Indian Rupee also initially appreciated by five percent against the dollar from 2008 to 2009. However, it has recently depreciated sharply due to the country’s burgeoning current account deficit.

Consequently, Brazil and South Africa witnessed a sharp drop in their exports of manufactured goods, while imports from other countries shot up alarmingly. “Brazil has dropped to 14th place in machinery and equipment exports, while imports doubled because of exchange rate overvaluation,” said da Silva.

Meanwhile, the policy flexibility of South Africa, Brazil and India, as reflected by the Wiggle Room Index constructed by The Economist, is not high. The three countries are ranked 65th, 79th and 82nd, respectively.

Against this backdrop, WTO director general Pascal Lamy issued a nuanced statement on Mar. 27 on the exchange rate volatility and its various effects on traders. He said international trade needs exchange rate stability.

“Trade measures cannot correct policy imbalances elsewhere, and be an answer to non-trade policy concerns…. Tit-for-tat measures would be a recipe for protectionist crossfire,” Lamy cautioned.

All these issues, Lamy said, “require a mix of cooperation in the macro-financial field and proper domestic policies which lie outside the remit of the WTO.”

The director general exhorted participants to make sure that the “WTO system does not crumble under the weight of excessive expectations.”

In contrast, a senior official of the U.S. administration, which is providing credit at close to zero percent to its banks and industry since the onset of the financial crisis in 2008, complained that China had kept the Yuan nearly unchanged despite a growing current account surplus and bulging foreign exchange reserves.

“A strong consensus now exists on the importance of promoting market-determined exchange rate systems, enhancing flexibility to reflect underlying economic fundamentals, avoiding persistent exchange rate misalignments and refraining from competitive currency devaluation,” said Mark Sobel, the U.S. Treasury Department’s deputy assistant secretary for international monetary and financial policy.

China responded saying that those countries adopting unconventional monetary policy have contributed to the currency volatility and misalignment by adding liquidity to financial markets.

“Exchange rate volatility was intensified by the monetary policy of major currency issuers – the U.S.,” Ruogu Li, president of China’s Exim Bank, told the participants.

“Both developed and developing members have fallen victim to major currency issuers,” the Chinese banker said, according to sources present at the meeting. “For every iPhone sold in the U.S., Chinese workers and companies get less than two percent, while the rest of the profits go to the American companies.”

The seminar has underscored the need to acknowledge the problem.

“If countries agree that misalignments are a given in the current international economic and trade processes, it is important to discuss the trade-related aspects of the problem at the WTO,” said Azevedo.

(END/2012)

Rail networks in Africa remain underdeveloped only 10 percent of transport goes via rail. A train crossing the Namib Desert on its way from the Namibian port of Walvis Bay to the uranium rich Erongo Region. Credit: Servaas van den Bosch/IPS

By Servaas van den Bosch

JOHANNESBURG, Mar 29 (IPS) – South Africa’s membership of the bloc of leading emerging economies and its unique position in Africa heralded the country’s role as a gateway into the African continent. However, trade experts question whether it can live up to this position as investors begin to increasingly look towards other African markets.

In 2003 South Africa became part of the IBSA grouping (India, Brazil and South Africa), and seven years later it joined the bloc of countries now known as BRICS (Brazil, Russia, India, China and South Africa). Economists have predicted that the dynamic growth of the BRICS countries will bring about a shift in economic power toward the developing world.

And South Africa, as the most developed country in Africa, offers the infrastructure and services to unlock the region’s frontiers, they say.

With the International Monetary Fund forecasting 2012 growth figures averaging around six percent for sub-Saharan Africa – and with countries like Angola raking in GDP growth of almost double that – the continent is touted as the investment destination of the decade.

Africa’s population of just over one billion pales in comparison with Asia’s 3.8 billion, but the African market is largely untapped and most countries find themselves on a firm growth trajectory.

South Africa, therefore, should be the logical first port of call for investors. But regional trade experts gathered at a mid-March forum on South Africa’s Trade Policy, organised by the South African Institute for International Affairs (SAIIA), questioned the gateway concept.

“Yes, South Africa represents the continent in the G20 (bloc of developing nations), but that is not the point,” said Peter Draper, senior research fellow with SAIIA. “If a gateway is supposed to be a transmission belt between global and regional markets and production facilities, the question should be whether South Africa can use its physical and material infrastructure to fulfil a connecting function between Africa and the rest of the world.”

The answer to this question is not an unequivocal yes. “The need to get minerals down from the central African plateau to the ports, using South Africa’s good infrastructure, has boosted it as a transport hub,” said Draper. “But South Africa, geographically speaking, is not optimally located, and some of the traditional advantages are rapidly eroding.”

Places like South Africa’s economic province of Gauteng or its coastal city of Cape Town are no longer necessarily the preferred outposts from which multinationals conquer the continent.

The reason for this is not just because South Africa is relatively far from African markets.

Global player General Electric recently choose Nairobi as its sub-Saharan hub – following companies like Coca Cola, Nestle and Heineken – and it based its decision partly, say trade academics, on South Africa’s unpredictable policy environment.

“It raises the question: to what extent do foreign companies still use South Africa as a conduit into the continent?” said Draper, who said heavily populated centres of West Africa – and not South Africa – will drive future growth on the continent.

According to Dianna Games, chief executive officer of consulting firm Africa @ Work, South Africa used the gateway concept to position itself globally. “But this idea of South Africa as a single gateway into the continent is not necessarily shared by the rest of Africa.

“As foreign investors are disaggregating African regions and countries, South Africa is losing traction on a whole host of issues. This does not mean that other African countries are necessarily in a better position, but the reality is that these markets are moving up, while South Africa is sliding.”

She added that South Africa, situated at a remote tip of the continent, should deploy progressive strategies to keep attracting investment.

“Investors go directly to other African markets, because they can. The South African government is not as worried about the decline of this competitive edge as it should be,” she said.

Games said the South African port of Durban was one of the most expensive in the world. Though, with the rehabilitation of the East and West Coasts of Africa, some of it by resource companies needing to find more convenient export routes, trade patterns were starting to change in the region. In time, it is likely that Durban will be just one more port handling regional trade, rather than the main one.

“Investors are also worried about current government policies, including a decline in economic and press freedom. South Africa is losing its status as an exception in Africa, and is viewed by some to be on a downward trajectory, with some other economies rapidly improving. Meanwhile, the actions of petty bureaucrats have affected the relations between South Africa and other African countries, which generally are not managed well.”

In this vacuum, China and India have long since bolstered bilateral relations with most African countries. And Portuguese-speaking Africa, especially Angola, is Brazil’s well-established gateway into the continent.

“With 240 Australian listed mining companies, among others, and over 800 oil and gas outfits operating in Africa, the gateway concept is declining. Many of these companies operate from their host countries and go direct to the resources as required, rather than setting up headquarters in Africa…We focus heavily on BRICS and not on African countries. But BRICS might fizzle out,” Games said.

“We inherited the role of a gateway, it wasn’t necessarily a policy objective,” commented one South African trade official. “And we are certainly not a gatekeeper, which is the connotation that goes with the idea of a gateway.”

But according to the official, it is not really relevant whether South Africa is losing its gateway status. “We would welcome investments being routed directly to African countries. That way our collective growth trajectory is increasing. It means our policies are working. It means that the continent is growing and becoming more competitive. We need a growing Africa for South Africa’s own future.”

(END/2012)

India’s generic pharmaceutical industry meets 70 percent of domestic demand and exports 11 billion dollars worth of generic drugs annually. / Kristin Palitza/IPS

NEW DELHI, Mar. 19 (IPS) – By allowing a generic manufacturer to produce a patented cancer drug at a fraction of its current cost, India has declared that it is not about to abandon its role as the ‘pharmacy of the world’s poor’.

In a path-breaking move on Mar. 9, India’s patent office invoked compulsory licensing (CL) provisions under World Trade Organisation (WTO) rules to allow generic drug manufacturer Natco Pharma to produce and sell ‘Nexavar’ in India, a drug developed by the German pharmaceutical giant Bayer to treat liver and kidney cancer.

CL allows generic manufacturers to produce a patented drug or use a patented process when denied by the patentee. It is an important ‘flexibility’ clause in the WTO agreement on trade-related aspects of intellectual property rights (TRIPS), but one that countries capable of manufacturing generics are still putting to test.

The issue has aligned non-government organisations (NGOs) and the manufacturers of generic drugs with those governments prepared to take on powerful pharmaceutical multi-national corporations (MNCs) that sell drugs worth more than 800 billion dollars annually. “India always had CL provisions, even in its original 1970 patent laws. In 2005, when amendments were made to make WTO laws consistent, CLs were retained and this was a major achievement (of the Doha declaration of 2001),” Sachin Chaturvedi, senior fellow at the Research and Information System for Developing Countries, a think-tank of India’s ministry of external affairs, told IPS.

“More generic drug manufacturers in India are sure to come forward now and seek licenses to cheaply manufacture drugs and make them accessible to the poor,” said Meera Shiva, chairperson of the Health Action International – Asia Pacific, an NGO dealing with public health issues.

Shiva told IPS that the cost of treatment with Nexavar – the trade name for sorafenib tosylate – is expected to drop by nearly 97 percent, from 5,500 dollars for a month’s treatment per person to about 175 dollars, once production of a generic version by Natco Pharma begins.

“This will bring relief to more than a million people suffering from liver and kidney cancer and extend their lives by several years,” said Shiva. “It brings hope in a country where government surveys have shown that 65 percent of the 1.1 billion population fall into debt as result of ‘out-of-pocket’ healthcare spending.”

India’s patent office ruled that “the mandate of the law is not to just supply the drug in the market, but to make it available in a manner such that (a) substantial portion of the public is able to reap the benefits of the invention. If the terms are unreasonable, such as high cost, availability is meaningless.” Shiva said what is significant is the realisation that avenues exist within the WTO for governments to intervene on behalf of their people and ensure access to medicines in the face of attempts by pharmaceutical MNCs to keep profit margins high.

Indian Move a Victory for IBSA

Volunteers for the humanitarian organisation Doctors Without Borders (known by its French acronym MSF) in Brazil and South Africa – countries that have benefited from the Indian generics industry – hailed the Indian move.

“In 2007, the Brazilian government issued a CL for the drug Efavirenz, used to treat AIDS, after declaring it of public interest,” said Felipe de Carvalho, project officer with MSF’s Access Campaign in Brazil.

“Right after the issuance of the CL for Efavirenz, while local production was being developed, Brazil bought generic versions from Indian generic producers,” de Carvalho said. “In 2007 alone, the purchase of cheaper versions of Efavirenz represented savings of 30 million dollars.

“So, if the use of CL in India is expanded and allows for exportation, countries like Brazil can benefit from the resulting generic production, as happened in the case of Efavirenz,” de Carvalho told IPS.

When the Brazilian government issued the CL for Efavirenz, the country became the target of intense denouncement by pharmaceutical companies and developed country governments, de Carvalho said.

“The decision in India is important to reinforce developing countries’ right to use TRIPS flexibilities.”

India’s CL has brought on a storm of protests from pharmaceutical MNCs. In a published statement Ranjit Shahani, who heads the Switzerland-based Novartis in India, warns that the move will “work to the detriment of patients through the negative impact they (CLs) will have on future investment in innovative pharmaceuticals.”

However, Shiva debunked this claim that investments in research and development for drugs come solely from excessive profits generated by the pharmaceutical industry. “The fact is, there is publicly- funded research and often big pharma benefits from that too.”

Catherine Tomlinson, senior researcher at the Treatment Action Campaign in South Africa, said it was “heartening to see India’s ongoing resistance against pressure from developed countries to not use the TRIPS provisions to protect health and we hope it will serve as a positive example for our own government.

“For activists in South Africa, it is distressing that our government continues to bow to pressure not to use CL provisions, despite the country facing numerous health emergencies and many critical medicines remaining unavailable to the majority of the population,” Tomlinson told IPS.

Leena Menghaney, a lawyer who works for MSF’s Access Campaign in New Delhi, said India’s patent laws had many advantages. “CLs can be issued to generic producers if patented drugs are unavailable or unaffordable, or if countries that lack production capacity order drugs from India.

“In fact compulsory licensing, under Indian law, is not reserved for emergencies – this is another myth spread by the MNCs,” Menghaney said.

Between 1970 and 2005, India did not recognise patents for medicines, allowing the growth, in that period, of a large and powerful generic pharmaceutical industry that takes care of 70 percent of domestic demand and also exports 11 billion dollars worth of generic drugs annually.

(END/2012)