Tag: Trade & Investment

The Bitter-Sweet Sides of Ugandas Oil and Gas Development — Global Issues

A former fishing village based in the Buhuka flats on the Uganda side of Lake Albert on the DRC border. Residents in the area say oil exploration has come with changes. Credit: Wambi Michael/IPS
  • by Wambi Michael (kampala, buliisa, kikuube)
  • Inter Press Service

KAMPALA, BULIISA, KIKUUBE, Sep 21 (IPS) – French oil and gas giant TotalEnergies and China National Offshore Oil Corporation (CNOOC) are moving with pace in the development of oil and gas projects with a potential investment portfolio estimated at more than USD 15 billion. IPS looks at the project’s human rights record for the compensation of affected communities.

The development of oil and gas infrastructure in Uganda’s Albertine has been moving quickly since February 2022 when China National Offshore Oil Corporation (CNOOC) and France’s TotalEnergies signed the Final Investment Decision (FID).

It is anticipated that part of the 1.4 billion barrels of oil discovered in the Rift Valley region bordering DRC should be pumped out of the ground by the end of 2025.

TotalEnergies EP Uganda is working with CNOOC Uganda and Uganda National Oil Company (UNOC) through a Joint Venture Partnership plan to invest more than USD 10 billion to develop upstream facilities alongside the East African Crude Oil Pipeline (EACOP) that will transport oil produced from Uganda’s Lake Albert oilfields to the port of Tanga in Tanzania onwards to world markets.

Some Have Benefitted

The effect of the flow of so-called “petrodollars” to a region whose people have for ages begged for development is visible to those who have been to this area long before oil and gas were discovered there. From once-dirt roads to several newly constructed tarmacked roads, an international airport near completion, and new iron-roofed houses in some communities as compensation to the Project-Affected Persons (PAPs), as they are commonly referred to in the Districts of Hoima, Buliisa, Kikuube, and Nwoya.

“I think oil has impacted the Buliisa district greatly. Because I would not expect this road. Can you imagine a tarmac road has reached my home? It is because of oil. It was going to take us many years to get such good roads if the oil project had not kicked off,” says Mugaye Richard.

While there are serious environmental concerns related to the developments, the developers and the government are determined to proceed. Some residents, like Richard Mugaye, have benefited from compensation in cash or had new houses say they benefited way before the oil gets out of the ground.

“I’m expecting an even better life when oil production begins,” says Amina Lubyayi, a 38-year-old mother of seven who lives near the Buhuka flats, where China National Offshore Oil Corporation’s (CNOOC) Kingfisher development is located.  The project will produce 40,000 barrels of crude oil per day during peak production.

Lubyayi is among those who had houses constructed for by CNOOC under the King Fisher resettlement action program in Buhuka flats.

“Our house was walled with mud and reeds. The mud would collapse whenever it rained. That is no more; I used to cook from a makeshift kitchen, but now I have a permanent one. We have light from solar, and we have a pit latrine, too,” Lubyayi told IPS.

Over 100 kilometers away from Kikuube to Buliisa district, 40-year-old Phinehas Owor-Mungu is planting fruit trees in the gardens of his newly acquired four-roomed stone-built house.

He told IPS that he was among the “lucky ones” whose land and developments were affected by TotalEnergies projects. “Because I and my family live in a much better house. I also got some cash in compensation for trees and crops and a disturbance allowance,” he explained.

“You see, sometimes, when you are eating well, your neighbors may be jealous. People have been compensated. Those who opted for cash got their cash, and we who opted for houses have had houses built for us. The roads here have improved, and people are getting employed. And then one says people are worse off?”

Down the road, 33-year-old Stephen Enach is busy placing a slab on a pit latrine to one of the houses that will soon be handed over to another person affected by the oil projects.

Jobs like Enach’s have become plentiful, and many young men and women are directly working with TotalEnergies or its subcontractors.

So far, 12,000 jobs have been created, according to Betty Namubiru, the Manager of National Content at the Petroleum Authority of Uganda.

“It is important to note that 94 percent of the 12,000 are Ugandans. We hope to hit 160,000 jobs when the construction of facilities is at its peak. And more Ugandans will have more opportunities,” Namubiru told IPS.

Compensation Complaints

Fred Lukumu, the District chairperson, told IPS that while the Buliisa District is witnessing some of the benefits of oil and gas developments, there has been an outcry over the delay in compensating the PAPs.

“So many people have lost their lives before earning their compensation which they were entitled to because of the delay. There has also been an outcry that compensation rates have been generally low. Especially for land.”

He told IPS that land in Buliisa district was valued at 3.5 million shillings ($945) per acre, yet in the neighborhood, the cost of land there was almost double the cost.

Fred Balikenda is one of those who have refused to be relocated from their land before they are adequately compensated. He is a resident of Kigwera sub-county, where TotalEnergies is putting up several structures, including a central processing facility. While all his former village mates accepted compensation and moved to their resettlement houses, Balikenda told IPS that he was determined to die for his land.

“They came and fenced my land illegally. They were supposed to construct a house for me before I vacated. The road which I was using was closed,” he narrated. “A man will remain a man. I will stay here. If they don’t pay me 200 million shillings, I will not shift. They will kill me, and it will remain as history.”

Peter Lokeris, Minister of State for Minerals, is one of the government officers who has tried to resolve compensation-related complaints. He told IPS that the 200 million shillings ($540,000) that Balikenda was demanding was exorbitant. He told IPS that the government has faced challenges with “speculators” who said have tended to hike the price of the land beyond the market rates.

“We shall have to repay the oil companies the money they have used to build houses and pay compensation. They are not free,” he said. “So, if we think that we will cheat the companies, the companies will cheat us. If we produce and there is no profit, we shall not earn anything as a country.”

In July, Human Rights Watch released a report, “Our Trust is Broken,” which documented what it described as “devastating impacts” on the livelihoods of Ugandan families from the land acquisition process.

“Critically, Human Rights Watch found that affected households are much worse off than before,” said the report.

“Most lands were initially evaluated in 2017-2019. Compensation was not received until three to five years later, in 2022 or 2023. Considerable hardship accrued from these delays that were also poorly communicated amidst confusion over the ability to access crops during this time,” the Human Rights Watch report said.

“EACOP has been a disaster for the tens of thousands who have lost the land that provided food for their families and an income to send their children to school and who received too little compensation from TotalEnergies,” said Felix Horne, senior environment researcher at Human Rights Watch. “EACOP is also a disaster for the planet, and the project should not be completed.”

Dickens Kamugisha, a lawyer and the Executive Director of the African Institute for Energy Governance (AFEIGO), told IPS that some of the PAPS have waited for over five years without compensation.

“We have seen hundreds of Ugandans who are being displaced without fair and adequate compensation. The constitution says you must give those who are affected adequate and fair compensation.”

TotalEnergies says it would apply an uplift of additional financial compensation of 15 percent per year for the period between the valuation of the inventory and payment in Uganda to mitigate the impact on the communities.

 “These measures were aimed at mitigating the effects of these delays on the PAPs in their daily lives. In practice, most people interviewed by Human Rights Watch only received 30 percent (two years of 15 percent) even though compensation delays, in many cases, were between three and five years. One man said: “This was grossly inadequate to make up for several years of diminished or no revenue from lost land.”

Another man said: “For three years, I did not access my coffee plants. Two kids dropped out of school. My revenue went from 4 million to 1 million a year. They gave me 30 percent.”

Patrick Jean Pouyanné, TotalEnergies’ Chief Executive Officer, has continued to dismiss reports like the one by Human Rights Watch.

“I can tell you that we always take care of community concerns. There are so many reports by third parties. Not by us because nobody believes in us. The fact is that you can have one or two people who may not be happy with the way they are relocated. But we are doing that in the best standards possible.”

However, Human Rights Watch said TotalEnergies’ practices on EACOP’s land acquisition process were inconsistent with its expressed commitment to uphold relevant international standards on land acquisition.

Why the Delay in Compensation?

Ernest Rubondo, the Executive Director at the Petroleum Authority of Uganda, whose Authority regulates the Oil and Gas Sector, told IPS that the delay in compensation for EACOP, Tilenga, and Kingfisher developments was one of the challenges. However, he noted that no land can be utilized for the projects before full compensation.

He explained that the processes of land acquisition and compensation in Uganda are not short.

“First of all, you have to properly identify the land that you would like to acquire. Secondly, you have to confirm the number of people who are on the land. And that isn’t always easy because the land ownership systems in the country are quite different,” he said. “There are many people sitting in Canada and the US, but they have land here.”

Rubondo told IPS that in some instances, they found people occupying land but had no proof of ownership and did not know how much land they had, especially in the Albertine region, where land had not been titled right from the colonial period.

The Determination of Compensation Rates

According to Rubondo, the determination of compensation rates originated from the district where the land is located.

“The district has to propose the rate; the government Chief Government Valuer has to compare them with what happens in other districts and the other values. As you would expect, no one ever accepts that this is the right amount for ‘my land’. So, you start going back and forth,” explained Rubondo.

He said once the rates are determined, they are communicated to the landowners who had options whether to receive cash compensation in exchange land for land, or have houses built for them.

“For those that opt for cash, you have to help them to open bank accounts; then you have to educate them on how to handle the money. Because NGOs are saying it is unfair to get these large amounts of money and put them in the hands of people who have never had such large sums of money,” added Rubondo. “You will never have all of them to agree. You put those who disagree in a certain bracket. So that process is not short.”

He noted that the value of the land identified for the project changes per year.

“The delays have been recognized. And these project-affected persons are being compensated for the delay at a rate of 15 percent per year. Thirty percent of the value of land compensation for disturbance is a disturbance allowance. And then they are given things like food to take them through the transition.”

However, Dickens Kamugisha told IPS that government officers tended to prioritize fast-tracking projects like EACOP regardless of the complaints by PAPs.

“It’s those officials who say that they have learned from the failures of those other oil producers, that they will not repeat those mistakes. But when you say the project must move on when you know that there are things you must address, what are you doing to your country? What are you doing to your citizens?” asked Kamugisha.

Compensations Update

IPS received information from the Petroleum Authority about the status of compensation under the King Fisher Development Project (KFDP) operated by CNOOC, Tilenga Development, operated by TotalEnergies, and EACOP under a joint venture led by TotalEnergies.

Tilenga Project by TotalEnergies

The total land requirement for the Tilenga Project is approximately 2,901 acres. The land acquisition process for the Tilenga project stands at 97 percent, with approximately 5,412 out of 5,523 PAPs fully compensated, with 143 resettlement houses handed over, 15 are ready to be handed over, and 77 under construction.

The Kingfisher Development Project (KFDA) by CNOOC.

The acquisition of land for the KFDA was concluded at 100%. The total land requirement for the KFDA is approximately 1,020 acres with 727 Project Affected Persons (PAPs). Sixty-five (65) resettlement houses were constructed and handed over to the owners.

EACOP Compensation Ugandan Side

The total land taken for the EACOP project was estimated at 2,740 acres, housing four construction camps, heating stations, and the pipeline right of way (ROW). The compensation stood at 84 percent, with 3,062 out of 3,656 having received their compensation and a total of 177 resettlement houses handed over to the respective owners.

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African Agro-Processors Call for Policies Conducive to Local Manufacturing — Global Issues

Experts are calling on countries to change their policies to protect locally produced products. For example, Nigeria is an exporter of rubber but imports tyres; Ghana exports cocoa, but Switzerland is known for chocolate. Here a worker in a factory in Abidjan holds a block of rubber meant for export for processing into finished products abroad.
  • by Isaiah Esipisu (dar es salaam)
  • Inter Press Service

DAR ES SALAAM, Sep 15 (IPS) – Experts at the Africa Food Systems Forum (AGRF) in Dar es Salaam, Tanzania, have called on African governments to make and review existing policies to protect the processing and agro-industrialisation of locally produced agricultural products.

During the launch of the Deal Room, Mohammed Dewji, President of MeTL Group of Companies in Tanzania, observed that agriculture will remain meaningless without agri-processing. https://www.ipsnews.net/2021/05/kenyas-dryland-farmers-embrace-regenerative-farming-to-brave-tough-climate/

“Tanzania produces cotton, and it is perhaps the third largest producer. How come it has only three textile firms? We are farming the cotton, ginning it, and exporting the same to China, where the final product is produced, died, and printed, and then it is sent back to us. Because of taxes involved at the local manufacturing level, we cannot compete,” he said.

“Unless we put in place correct policies that will favour local manufacturing, we will continue talking about cocoa from Ghana and chocolate from Switzerland,” he told delegates at the Deal Room.

The Deal Room is a matchmaking platform hosted at the AGRF, aiming to drive new business deals and commitments, where companies in the agriculture and agribusiness sectors can access finance, mentorship, and market entry solutions to support their growth objectives.

According to Wanjohi Ndagu, the Partner and Investment Director at Pearl Capital Partners Ltd based in Uganda, many African governments have policies that favour importation even when farmers in those countries have bumper harvests of the same product.

“We need policies that are able to protect farmers and local production,” he said.

Other than cocoa in Ghana and chocolate from Switzerland, countries like Ivory Coast and Nigeria are net exporters of natural rubber, which is processed and brought back to them as car tyres, footwear, and rubber-based industrial goods.

Tanzania, Mozambique, and Ivory Coast are net exporters of cashew nuts but importers of roasted and processed cashew nuts, cashew butter, and other value-added cashew products.

Kenya is currently delving into the exportation of raw avocado, but the country has always imported particularly avocado cosmetic products.

However, all is not lost.

Rwanda was showcased as one of the success stories in Africa where, through favourable policies, the country has created a conducive environment attracting investment into the agro-processing sector.

“Our country’s Strategic Plan for Agriculture Transformation has enabled us to move the sector from subsistence to a knowledge-based, value-creating sector,” said Nelly Mukazayire, the Deputy CEO of the Rwanda Development Board (RDB).

To make work more accessible and attractive to investors, the country has created a one-stop-centre where investors in any given sector, including agro-processing, are given services right from the search for a business name, business registration, generation of unique identification of the registered business, the opening of the business bank account and issuance of relevant permits and licenses, and the entire process takes a maximum of eight hours for the business to become a legal entity.

In many other African countries, such processes can take more than four months and, in some cases, a year for a business to get proper registration, and this, according to the delegates at the AGRF, slows down the rate of investment.

“Investors in the agriculture sector in Rwanda also have an opportunity to get up to seven years of tax holiday and reduced corporate income taxes on exports,” said Mukazayire.

After the COVID-19 pandemic, the country launched what is today known as the Manufacture and Build to Recover Programme (MBRP), aiming to boost economic recovery efforts with specific incentives for the manufacturing, agro-processing, construction and real estate development sectors.

Through MBRP, manufacturers with a capital of USD1 million and above are given import duty exemption and Value Added Tax (VAT) exemption for imported construction materials unavailable in East Africa, VAT exemption for machinery and raw materials sourced domestically and VAT exemption for construction materials sourced domestically.

However, the capital for agro-processing was capped at USD 100,000 to support the sector’s growth.

During the AGRF Deal Room event, Brent Malahay, the Chief Strategy Officer at the Equity Group, called on investors to take advantage of the bank’s ‘Africa recovery and resilience plan,’ whose aim is to capacitate, finance and connect East African Community value chains to global supply chains.

“Through this plan, Equity Group will leverage off a region that gives access to critical raw materials, supports industrial capacity needs and an entrepreneurial and innovative local workforce, and the one that provides a sizeable market that is increasingly becoming more integrated,” said Malahay.

During the event, Isobel Coleman, Deputy Administrator at the United States Agency for International Development (USAID), announced an investment of USD4 million into VALUE4HER, AGRA’s Deal Room product, which is a continental initiative aimed at strengthening women’s agribusiness enterprises and enhancing voice and advocacy across Africa.

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Mexico Turns to Military Entrepreneurs — Global Issues

Sara López (C) and other members of the Regional Indigenous and Popular Council of Xpujil are seen here in a photo from 2020, while campaigning against the environmental problems posed by the Mayan Train, which will run through part of southern and southeastern Mexico. The Secretariat (ministry) of National Defense has been put in charge since September of the construction and administration of the Mexican government’s flagship project. CREDIT: Cripx
  • by Emilio Godoy (mexico cityhttps://ipsnoticias.net/2023/09/mexico-gira-hacia-los-militares-empresarios/)
  • Inter Press Service

MEXICO CITYhttps://ipsnoticias.net/2023/09/mexico-gira-hacia-los-militares-empresarios/, Sep 14 (IPS) – Courage, sadness and impotence are expressed by Mayan indigenous activist Sara López when she talks about the Mayan Train (TM), the Mexican government’s biggest infrastructure project, which will cross the town where she lives and many others in the Yucatan Peninsula.

“These are things that cause damage. In the communities, both the National Guard (a civilian security force, but made up mostly of military personnel) and the army are present. People tell us they have lost the peace they used to have. There are communities that have been invaded, there has been a very strong impact,” the member of the non-governmental Regional Indigenous and Popular Council of Xpujil told IPS.

“The entire Yucatan peninsula is militarized,” she said from Candelaria, in the southeastern state of Campeche. Agriculture and livestock are the main activities in the municipality of some 47,000 inhabitants, which will be the site of a TM station.

The megaproject consists of seven sections along some 1,500 kilometers and will also cross the states of Quintana Roo and Yucatan, which share the peninsula with Campeche together with the states of Chiapas and Tabasco.

The railway will run through 41 municipalities and 181 towns, with 20 stations and 14 stops.

President Andrés Manuel López Obrador, who begins his sixth and final year in office on Dec. 1, has transferred the administration of ports, airports and rail transport to the Secretariat (ministry) of National Defense (Sedena).

This is despite the fact that there are no records of their performance in the management of these key areas in the recent history of the country, in which their experience has been limited to the production and sale of supplies.

Aleida Azamar, a researcher at the public Autonomous Metropolitan University, argued that uniformed personnel are not prepared for these tasks.

“The military are not trained for many functions. The government is concerned about economic growth and development, and to preserve that model it has put the military in charge. They think it will be achieved through infrastructure and extractive projects,” Azamar, who is coordinating a new book on the military and natural resources in Mexico, told IPS.

“In their view, the fastest way to finish them is with the army, because it is more difficult for the public to put up opposition when they see someone with a gun. It is not the most adequate solution.”

López Obrador announced on Sept. 4 the transfer of control of the Mayan Train from the state-owned National Tourism Development Fund (Fonatur) to Sedena, in an intensification of the trend of ceding more civilian responsibilities to the military, by handing over his flagship megaproject.

The president’s argument for this strategy is that he aims to reduce corruption in public works. But actually it may be due to other reasons, such as the culture of discipline in following orders so that the works advance as quickly as possible and thus meet the deadlines set.

Sedena will be responsible for the completion of sections five, six and seven of the railroad, whose works were started by Fonatur in July 2020 and which López Obrador promised would begin to operate by Dec. 1. Other sections are being built by private companies.

The resistance to deploying the military into the TM and other civilian areas is also due to its actions since 2006, when then President Felipe Calderón launched the so-called “war against drugs” using the military, which led to extrajudicial executions, disappearances, human rights violations and impunity, according to local and international organizations.

In fact, so far this century the Inter-American Court of Human Rights, the highest regional court attached to the Organization of American States, has condemned Mexico on at least five occasions for military crimes such as forced disappearance, sexual violence and arbitrary detention.

The government promotes the TM as a major new engine of socioeconomic development in the southeast of the country and its trains will transport thousands of tourists, and cargo such as transgenic soybeans, palm oil and pork, the main products in the area.

The administration claims that it will create jobs, boost tourism beyond traditional attractions, and invigorate the regional economy, which has sparked highly polarized controversies between its supporters and critics.

The Mayan Train will run 1,500 kilometers, through 41 municipalities and 181 towns in the south and southeast of Mexico, with a cost overrun that already exceeds 28 billion dollars. CREDIT: Fonatur

From the barracks to business

Historically, the armed forces had been limited to producing supplies and building government facilities, such as hospitals and other infrastructure.

Sedena’s General Directorate of Military Industry operates at least 16 ammunition and armament factories.

However, thanks to the policies of the current government, Sedena has created the corporations Tren Maya, Aerolínea del Estado Mexicano, Grupo Aeroportuario, Ferroviario, de Servicios Auxiliares y Conexos Olmeca-Maya-Mexica (Gomm) and the Felipe Ángeles International Airport, located in the state of Mexico, adjacent to the Mexican capital.

Gomm is also involved in the operation of 12 airports, and will receive more in the future.

In addition, it will operate the revived Compañía Mexicana de Aviación, the country’s oldest airline and one of the first in the region, privatized in 2005 and closed since 2010. Under the new name Aerolínea del Estado Mexicano, the government resuscitated it in January, buying the brand. The armed forces will also manage hotels along the TM route.

At the same time, the Secretariat of the Navy (Semar) manages five shipyards in various areas of the country.

To run seven airports, including Mexico City’s, out of the 19 facilities under state control, Semar created the company Casiopea.

Mexico has 118 ports and terminals, of which 71 have been given in concession in 25 administrations of the National Port System. Since 2017, Semar has been administering the ports.

This scheme requires a lot of money, provided by the public budget. The clearest case is the TM, whose cost rose threefold, from the initial projected investment of 7.2 billion dollars to the current estimate of over 28 billion dollars.

For 2024, Sedena has already requested 6.7 billion dollars for the railroad, the second highest figure for the TM since 2020, when allocated funds totaled 349 million dollars.

Military requirements for all civilian sectors under their administration have grown, as Sedena requested 14.55 billion dollars, compared to 6.27 billion in 2023, and Semar asked for 4.02 billion, compared to 2.34 billion this year – in both cases more than double.

Behind this is the fact that state-owned companies under military management are not yet profitable, so they require subsidies. The non-governmental organization México ¿Cómo Vamos? calculates that it will take 17 years to recoup the investment in the TM and 22 years in the case of the Tulum International Airport, under construction in the state of Quintana Roo.

The Navy manages the Mexico City International Airport and six other airports, although it lacks experience in running this type of air transport infrastructure. CREDIT: Emilio Godoy / IPS

Potential threats

As in the case of military involvement in security and public safety, military business management poses risks of information concealment, corruption and economic losses.

The armed forces are the institutions that most violate human rights, including cases of murder, torture and sexual violence. Between 2007 and 2020, some 70,000 people suffered physical aggression after being apprehended by the army, according to the Citizen Security Program (PSC) of the private Ibero-American University.

The number of military personnel involved in public security already exceeds the total number of municipal and state police, in a proportion of 261,644 to 251,760, according to data reported by the PSC.

López the activist and Azamar the academic warned of the risks of military management.

“Only the government knows how much they have spent, how much is going to be spent,” said López. “There is no real report on what they are doing. Since the megaproject began, there has been no real information. They have never talked to us about environmental, cultural or economic impacts. It has caused us problems, it has been chaos for us. And once it is operating, the situation is going to get worse because of tourism.”

Azamar warned of increasing reliance on the military, the potential erosion of civil rights, a distorted perception of the approach to security and public safety and the undermining of trust in civilian institutions.

“There is a problem of lack of transparency and accountability: what is spent and how. It is risky, because there is no real, disaggregated data. This creates an environment of impunity that allows secrecy to continue and does not make it possible for other information to be made public. If there are no effective oversight mechanisms, abuses could be committed. We are in a gray area, because we do not know who controls them,” she argued.

In November 2021, López Obrador classified the TM as a “priority project” by means of a presidential decree, a strategy that facilitates the fast-tracking of environmental permits and thus hides information under the broad umbrella of national security.

This despite the fact that a month later, the Supreme Court reversed the national security agreements to annul the reservation of information, due to an appeal by the autonomous governmental National Institute of Transparency, Access to Information and Protection of Personal Data.

Mexico’s problems will not end in the short term, as pro-military policies will condition the next administration that will take office in December 2024, regardless of where it stands on the political spectrum, although the polls point to presidential hopeful Claudia Sheinbaum of the National Regeneration Movement (Morena), López Obrador’s party, as the favorite.

© Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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UN Must Reclaim Multilateral Governance from Pretenders — Global Issues

  • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
  • Inter Press Service

KUALA LUMPUR, Malaysia, Aug 24 (IPS) – International governance arrangements are in trouble. Condemned as ‘dysfunctional’ by some, multilateral agreements have been discarded or ignored by the powerful except when useful to protect their interests or provide legitimacy.

Economic multilateralism under siege
Undoubtedly, many multilateral arrangements have become less appropriate. At their heart is the United Nations (UN) system, conceived in the last year of US President Franklin Delano Roosevelt’s presidency and World War Two.

Jomo Kwame SundaramThe 1944 UN conference at Bretton Woods sought to build the foundations for the post-war economic order. The International Monetary Fund (IMF) would create conditions for lasting growth and stability, with the World Bank financing post-war reconstruction and post-colonial development.

The Bretton Woods agreement allowed the US Federal Reserve Bank (Fed) to issue dollars, as if backed by gold. In 1971, President Richard Nixon repudiated the US’s Bretton Woods obligations. With US military and ‘soft’ power, widespread acceptance of the dollar since has effectively extended the Fed’s ‘exorbitant privilege’.

This unilateral repudiation of US commitments has been a precursor of the fate of some other multilateral arrangements. Most were US-designed, some in consultation with allies. Most key privileges of the global North – especially the US – continue, while duties and obligations are ignored if deemed inconvenient.

The International Trade Organization (ITO) was to be the third leg of the post-war multilateral economic order, later reaffirmed by the 1948 Havana Charter. Despite post-war world hegemony, the ITO was rejected by the protectionist US Congress.

The General Agreement on Tariffs and Trade (GATT) became the compromise substitute. Recognizing the diversity of national economic capacities and capabilities, GATT did not impose a ‘one-size-fits-all’ requirement on all participants.

But lessons from such successful flexible precedents were ignored in creating the World Trade Organization (WTO) from 1995. The WTO has imposed onerous new obligations such as the all-or-nothing ‘single commitment’ requirement and the Agreement on Trade-related Intellectual Property Rights (TRIPS).

Overcoming marginalization
In September 2021, the UN Secretary-General (SG) issued Our Common Agenda, with new international governance proposals. Besides its new status quo bias, the proposals fall short of what is needed in terms of both scope and ambition.

Problematically, it legitimizes and seeks to consolidate already diffuse institutional responsibilities, further weakening UN inter-governmental leadership. This would legitimize international governance infiltration by multi-stakeholder partnerships run by private business interests.

The last six decades have seen often glacially slow changes to improve UN-led gradual – mainly due to the recalcitrance of the privileged and powerful. These have changed Member State and civil society participation, with mixed effects.

Fairer institutions and arrangements – agreed to after inclusive inter-governmental negotiations – have been replaced by multi-stakeholder processes. These are typically not accountable to Member States, let alone their publics.

Such biases and other problems of ostensibly multilateral processes and practices have eroded public trust and confidence in multilateralism, especially the UN system.

Multi-stakeholder processes – involving transnational corporate interests – may expedite decision-making, even implementation. But the most authoritative study so far found little evidence of net improvements, especially for the already marginalized.

New multi-stakeholder governance – without meaningful prior approval by relevant inter-governmental bodies – undoubtedly strengthens executive authority and autonomy. But such initiatives have also undermined legitimacy and public trust, with few net gains.

All too often, new multi-stakeholder arrangements with private parties have been made without Member State approval, even if retrospectively due to exigencies.
Unsurprisingly, many in developing countries have become alienated from and suspicious of those acting in the name of multilateral institutions and processes.

Hence, many in the global South have been disinclined to cooperate with the SG’s efforts to resuscitate, reinvent and repurpose undoubtedly defunct inter-governmental institutions and processes.

Way forward?
But the SG report has also made some important proposals deserving careful consideration. It is correct in recognizing the long overdue need to reform existing governance arrangements to adapt the multilateral system to current and future needs and requirements.

This reform opportunity is now at risk due to the lack of Member State support, participation and legitimacy. Inclusive consultative processes – involving state and non-state actors – must strive for broadly acceptable pragmatic solutions. These should be adopted and implemented via inter-governmental processes.

Undoubtedly, multilateralism and the UN system have experienced growing marginalization after the first Cold War ended. The UN has been slowly, but surely superseded by NATO and the Organization for Economic Cooperation and Development (OECD), led by the G7 group of the biggest rich economies.

The UN’s second SG, Dag Hammarskjold – who had worked for the OECD’s predecessor – warned the international community, especially developing countries, of the dangers posed by the rich nations’ club. This became evident when the rich blocked and pre-empted the UN from leading on international tax cooperation.

Seeking quick fixes, ‘clever’ advisers or consultants may have persuaded the SG to embrace corporate-dominated multi-stakeholder partnerships contravening UN norms. More recent SG initiatives may suggest his frustration with the failure of that approach.

After the problematic and controversial record of such processes and events in recent years, the SG can still rise to contemporary challenges and strengthen multilateralism by changing course. By restoring the effectiveness and legitimacy of multilateralism, the UN will not only be fit, but also essential for humanity’s future.

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Strengthening Partnerships for Sustainable Progress — Global Issues

Ahunna Eziakonwa
  • Opinion by Ahunna Eziakonwa (tokyo, japan)
  • Inter Press Service

TOKYO, Japan, Aug 23 (IPS) – At this year’s G7 summit in Japan, global leaders emphasized the importance of unity as the world navigates grave threats to multilateralism. The message was clear – trusted global platforms for dialogue and solutions are extremely crucial in current times.

They are right. More than ever before, effective multilateralism is needed to tackle the polycrisis and to create the world we want: one in which there is prosperity for all.

Thirty years ago, The Tokyo International Conference on African Development (TICAD), was launched as a multi-stakeholder forum for Japan and Africa to deepen collaboration, with the facilitation of partners like the United Nations Development Programme (UNDP).

UNDP is proud to be associated with TICAD – not least for it unique in its ability to tackle a wide – range of key issues of critical interest to Africa – like investment, skills training and technology transfer.

Since inception, TICAD’s investments in both aid and investment to Africa extend over the $100 billion mark. In the last three years alone, Japan has implemented 69 projects across Africa.

Ahunna EziakonwaCOVID -19 delivered a heavy setback to hard-won development gains, pushing millions back into poverty. Before the pandemic, Africa had seen important progress in human development, with living standards improving for a good part of the population. Six of the ten fastest – growing countries in the world were in Africa.

Today, we see regression – with COVID, growing conflict in some parts of Africa, and a cost-of-living crisis triggered by the impact of the war in Ukraine.

The challenges Africa faces today affect global prospects for attaining the SDGs, and put into sharp focus the criticality of effective partnerships. If we are to rescue the SDGs in Africa, we need to invest in opportunities that are foundational to accelerating Africa’s development.

So what is smart investment in Africa today?

It is all about investing in people. In less than ten years, 42 per cent of the world’s youth will live in Africa – and if the continent invests smartly, its young teeming innovators can create technology – led solutions to drive socioeconomic progress.

To secure a bright and prosperous future in Africa, Japan and UNDP are working together to invest in Africa’s people. This breadth stretches from support for inclusive governance, to ensuring women and youth are empowered, to social sectors like health and education.

In Nigeria, over 1000 young people in the conflict affected regions of the North-East and Middle Belt received an 8-week training on community – driven trade, and cash grants to help them set up new businesses. In Kenya and South Africa, young men and women participated in job skills training for car manufacturing in collaboration with Toyota Motor Corporation.

And in The Central African Republic, income generating activity groups were established, offering training in financial independence across sectors such as retail and animal husbandry. This initiative utilized the 5S-Kaizen methodology through a partnership with JICA. Japan’s support to UNDP’s Liptako Gourma Stabilization Facility has resulted in over 3000 women and youth benefitting from cross-border trade infrastructure and increased incomes for highly vulnerable borderland communities.

Literacy Training at Koudoukou Elementary School in the 3rd arrondissement of Bangui. Credit: UNDP Central African Republic, Arsène Christ NGOUMBANGO NZABE

Investing in green growth and trade

As the continent continues to chart its development pathway, with a strong vote for industrialization and diversification, the importance of advanced technological expertise is elevated. The new generation of development partnerships with Africa must frontload technology transfer including on a commercial basis – in areas of agriculture, health, education, energy transitions and smart cities.

A prime illustration is Japan’s Green Growth Initiative with Africa, which promotes green economics and support to just energy transitions with African ownership at the core.

Development of local industries and regional value chains will promote Africa’s industrialization – which both COVID 19 and the war in Ukraine have demonstrated – are key tenets of not just effective but also responsible partnerships.

A recent investment report by UNDP identified 157 SDG investment opportunities across 31 industries in Africa with significant financial and impact potential. The industries range from food and beverage to infrastructure, health care, renewable resources and alternative energy.

These investments now have an even larger network of markets – thanks to the African Continental Free Trade Area (AfCFTA) – the world’s largest trade zone by number of participating countries and geographical coverage.

The Japan – UNDP partnership has proven its worth in stepping into areas of development acceleration. As Africa stands at a critical inflection point, a vital window of opportunity exists to unlock the continent’s full potential – making Africa’s resources work for its people’s development. Now is the time for to step up the partnership. Now is the time to unlock Africa’s promise.

Read more about UNDP’s Renewed Strategic Offer in Africa ( Africa’s promise) here.

Ahunna Eziakonwa is Assistant Secretary-General, Assistant Administrator and Director of the Regional Bureau for Africa, UNDP

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Exchange Rate Movements Due to Interest Rates, Speculation, Not Fundamentals — Global Issues

  • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
  • Inter Press Service

KUALA LUMPUR, Malaysia, Jul 26 (IPS) – Currency values and foreign exchange rates change for many reasons, largely following market perceptions, regardless of fundamentals. Market speculation has worsened volatility, instability and fragility in most economies, especially of small, open, developing countries.

US Fed pushing up interest rates
For no analytical rhyme or reason, US Federal Reserve Bank (Fed) chairman Jerome Powell insists on raising interest rates until inflation is brought under 2% yearly. Obliged to follow the US Fed, most central banks have raised interest rates, especially since early 2022.

Jomo Kwame SundaramThe US dollar or greenback’s strengthening has been largely due to aggressive Fed interest rate hikes. Undoubtedly, inflation has been rising, especially since last year. But there are different types of inflation, with different implications, which should be differentiated by nature and cause.

Typically, inflationary episodes are due to either demand pull or supply push. With rentier behaviour better recognized, there is now more attention to asset price and profit-driven inflation, e.g., ‘sellers inflation’ due to price-fixing in monopolistic and oligopolistic conditions.

Recent international price increases are widely seen as due to new Cold War measures since Obama, Trump presidency initiatives, COVID-19 pandemic responses, as well as Ukraine War economic sanctions.

These are all supply-side constraints, rather than demand-side or other causes of inflation.

The Fed chair’s pretext for raising interest rates is to get inflation down to 2%. But bringing inflation under 2% – the fetishized, but nonetheless arbitrary Fed and almost universal central bank inflation target – only reduces demand, without addressing supply-side inflation.

But there is no analytical – theoretical or empirical – justification for this completely arbitrary 2% inflation limit fetish. Thus, raising interest rates to address supply-side inflation is akin to prescribing and taking the wrong medicine for an ailment.

Fed driving world to stagnation
Thus, raising interest rates to suppress demand cannot be expected to address such supply-side driven inflation. Instead, tighter credit is likely to further depress economic growth and employment, worsening living conditions.

Increasing interest rates is expected to reduce expenditure for consumption or investment. Thus, raising the costs of funds is supposed to reduce demand as well as ensuing price increases.

Earlier research – e.g., by then World Bank chief economist Michael Bruno, with William Easterly, and by Stan Fischer and Rudiger Dornbusch of the Massachusetts Institute of Technology – found even low double-digit inflation to be growth-enhancing.

The Milton Friedman-inspired notion of a ‘non-accelerating inflation rate of unemployment’ (NAIRU) also implies Fed interest rate hikes inappropriate and unnecessarily contractionary when inflation is not accelerating. US consumer price increases have decelerated since mid-2022, meaning inflation has not been accelerating for over a year.

At least two conservative monetary economists with Nobel laureates have reminded the world how such Fed interventions triggered US contractions, abruptly ending economic recoveries. Although not discussed by them, the same Fed interventions also triggered international recessions.

Friedman showed how the Fed ended the US recovery from 1937 at the start of Franklin Delano Roosevelt’s second presidential term. Recent US Fed chair Ben Bernanke and his colleagues also showed how similar Fed policies caused stagflation after the 1970s’ oil price hikes.

De-dollarization?
However, the US dollar has not been strengthening much in recent months. The greenback has been slipping since mid-2023 despite continuing Fed interest rate hikes a full year after consumer price increases stopped accelerating in mid-2022.

Many blame recent greenback depreciation on ‘de-dollarization’, ironically accelerated by US sanctions against its rivals. Such illegal sanctions have disrupted financial payments, investment flows, dispute settlement mechanisms and other longstanding economic processes and arrangements authorized by the World Trade Organization, International Monetary Fund and UN charters.

Even the ‘rule of law’ – long favouring the US, other rich countries and transnational corporate interests – has been ‘suspended’ for ‘reasons of state’ due to economic warfare which continues to escalate. Unilateral asset and technology expropriation has been justified as necessary to ‘de-risk’ for ‘national security’ and other such considerations.

Horns of currency dilemma
For many monetary authorities, the choice is between a weak currency and higher interest rates. With growing financialization over recent decades, big finance has become much more influential, typically demanding higher interest income and stronger currencies.

Central bank independence – from the political executive and legislative processes – has enabled financial lobbies to influence policymaking even more. For example, Malaysia’s household debt share of national output rose from 47% in 2000 to over four-fifths before the COVID-19 pandemic, and 81% in 2022.

There is little reason to believe recent exchange rates have been due to ‘economic fundamentals’. Currencies of countries with persistent trade and current account deficits have strengthened, while others with sustained surpluses have declined. Instead, relative interest rate changes recently appear to explain more.

Thus, both the Japanese yen and Chinese renminbi depreciated by at least six per cent against the US dollar, at least before its recent tumble. By contrast, British pound sterling has appreciated against the greenback despite the dismal state of its real economy.

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Over-Reliance on Attracting Investment is Undermining Change at World Bank — Global Issues

  • Opinion by Bhumika Muchhala, Maria Jose Romero (new york / brussels)
  • Inter Press Service

NEW YORK / BRUSSELS, Jul 06 (IPS) – One message that was repeated throughout last month’s summit on a so-called “New Global Financing Pact” was that developing countries urgently need mass financing to tackle the climate and biodiversity emergency. And there is not enough of it in public coffers.

Unfortunately, the false narrative that the only way to fill this gap is to ‘leverage’ more private finance also persisted. The resulting Paris Agenda for People and Planet stated: “meeting global challenges will depend on the scaling up of private capital flows.” This should be achieved in large part by revamping the role of multilateral development banks (MDBs).

Last December, the World Bank Group (WBG), the biggest MDB, launched its so-called “evolution” process, with the support of G7 governments. This set the institution to work on increasing its lending by deepening its reliance on the financial market.

The dogged reliance on private capital as saviour appears to be steeped in capitalist realism. It is believed to be implausible for the public sector to deliver the scale of financing needed to address the climate and development crisis.

Private capital, which can be leveraged using public money, securitised and reproduced is favoured as the pragmatic choice. However, while the financing gap to deliver on the sustainable development goals is very real, the neat narrative buttressing private capital obscures two empirical realities.

First is the absence of rich countries’ political will to deliver on agreed commitments, from the 0.7 per cent of Gross National Income in development aid made in 1970 to the US$100 billion per year climate financing agreed in 2009.

Second, the ongoing systemic wealth drain from developing to rich countries. Since 1982, developing countries as a whole have transferred an estimated US$4.2 trillion in interest payments to global north-based creditors, far outstripping aid flows and concessional lending during the same period.

Additionally, tax-related illicit financial flows cost countries hundreds of billions of dollars in lost tax income every year. Debt servicing is draining approximately 25 per cent of total government spending in developing countries as a whole, hijacking both climate and SDG (Sustainable Development Goals) financing.

The allure of private finance

Last month, in a new attempt to ‘leverage’ private capital, the WBG launched the Private Sector Investment Lab, a partnership with the private sector that aims to “rapidly scale solutions that address the barriers preventing private sector investment.”

Furthermore, it announced “an expanded toolkit for crisis preparedness, response, and recovery” that includes providing “new types of insurance” to backstop private sector projects. This follows a not-so-new pattern articulated in the WBG’s Evolution Roadmap draft published in April

While the WBG is set to expand its mandate to incorporate “sustainability” considerations, the approach is still rooted in a heady cocktail of de-risking instruments such as risk guarantees, blended finance and first-loss positions by governments, and in tweaking national regulatory frameworks to enable a business-friendly environment.

The goal is as singular as the solution: to make investment more profitable for the private sector. The (optimistic) rationale: ‘incentivising’ private capital will ‘crowd in’ economic growth and climate, biodiversity and development financing. This assumes that it is possible to equate commercial goals and the public interest, which is not always the case without creating financial barriers that undermine access to public services, such as user fees.

It also ignores that risks are transferred from private to public actors, further increasing debt vulnerabilities, and the developmental dilemma posed by prioritising private profits over distributive goals and state sovereignty.

In ongoing discussions about the Roadmap, it is yet to be seen if the WBG will incorporate sufficient provisions within its plans to ensure the recipient state’s right to regulate in the public interest for a rights-based economy that upholds distributive justice. That is, economic, climate and gender equity.

Solutions with legitimacy

The largest coalition of developing countries in the United Nations (known as the “Group of 77”), representing 134 nations, have been calling for reform of the international tax, debt and financial architecture for many years.

These calls, enshrined in resolutions adopted by the UN General Assembly, includes establishing a multilateral legal framework that would comprehensively address unsustainable and illegitimate debt, including through extensive debt restructuring and cancellation, and agreeing on a UN Tax Convention with equitable participation of developing countries to address tax abuse by multinational corporations and other illicit financial flows.

As was made clear last month in several developing countries’ calls, a reform agenda should not be limited to merely boosting MDBs’ coffers – via financial innovation techniques – but rather include governance reform that meaningfully augments the voice and vote of developing countries in macroeconomic decision-making, which is the litmus test for legitimate and democratic economic governance.

Furthermore, for many in civil society, for the WBG to “evolve” in a credible way it must also seek to independently evaluate the development impact of its policy prescriptions for developing countries over recent decades. Civil society organisations are stating this again in official feedback on the Evolution Roadmap submitted to the Bank this week.

The ways in which the mythology of the private financier is construed dangerously omits the concrete reforms for historical economic justice, and state sovereignty, that the global south are demanding. This disjuncture calls for a clear-eyed questioning of the allure of private finance. Here lies the difference between new forms of extraction as opposed to change towards redistributive justice.

https://www.eurodad.org/civil_society_calls_for_rethink_of_world_banks_evolution_roadmap

Bhumika Muchhala is Political Economist and Senior Advisor at Third World Network
and María José Romero is Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad)

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Women’s Savings in Zimbabwe Struggle Under Weight of Unstable Currency — Global Issues

Zimbabwean women’s informal savings clubs have been hit by high inflation and the low value of the country’s currency. Credit: Ignatius Banda/IPS
  • by Ignatius Banda (bulawayo)
  • Inter Press Service

BULAWAYO, Jun 28 (IPS) – For years, self-employed and unemployed women in Zimbabwe formed neighbourhood “clubs” where they pooled money together for everything from buying bulk groceries to be shared at the end of the year to meeting funeral expenses.

But as inflation renders the local currency virtually worthless, with, for example, the price of a loaf of bread reaching ZWD4,000, women rights advocates say this has thrown local saving initiatives into a mind-numbing tailspin.

In recent weeks, the local dollar has been on a frenzied free fall against the greenback, and in one week alone, the parallel market rate went from USD1:ZWD2,000 to anything between USD1:ZWD3,000 and ZWD4,000.  Zimbabwe National Statistics Agency put Zimbabwe’s annual inflation rates at triple digits, with inflation rising 175.8% in June from 86.5% the previous month.

“We cannot buy foreign currency on the street to keep our savings club operating. You can’t plan anything with such an ever-changing exchange rate,” said Juliet Mbewe, a Bulawayo homemaker who sells snacks, sweets and other small items on a roadside not far from her township home.

“It was better when the country was using the USD as the official currency,” she said, referring to the period of the country’s government of national unity between 2009 and 2013.

That period is widely credited with taming  Zimbabwe’s economic turmoil and also helped make savings possible for women such as Mbewe.

Women’s savings clubs contributed monthly instalments of anything from as little as USD5, and from this pool, the club operated as an informal bank or microfinance lender where they issued loans at a small interest.

The accumulated savings were shared at the end of the year, while other such clubs bought groceries in bulk to be shared in time for Christmas.

And this was also a time when local banks encouraged women’s clubs to partner with registered financial institutions to incubate their savings and earn interest at the end of the year.

But with banks not being spared the decades-old economic turmoil, which has seen even banks close shop, financial institutions that remain are not known to offer ordinary account holders interest on their savings.

However, the return of rampant inflation is making the operation of women’s savings clubs increasingly difficult, says Mavis Dube, who formerly led a group of women’s clubs as their treasurer.

“It’s no longer easy because of the unstable currency. It now means having to raise more local dollars in order to buy foreign currency,” Dube said; as the authorities struggle to put breaks on a currency on free fall, these have been upended by inflation and an unsteady local currency.

For those who can afford that, the women are cushioning themselves from this by buying livestock which they say is guaranteed to store value.

International NGOs such as World Vision are assisting rural women navigate increasingly tough economic circumstances, supporting projects such as raising and selling poultry.

However, such projects have not been made available to more women in a country where self-help efforts face incredible odds as inflation gnaws into small enterprises.

While the Ministry of Women Affairs, Community, Small and Medium Enterprises Development has made efforts to encourage women’s participation in the country’s economic development agenda, it has struggled to keep up with the increasing number of women seeking assistance to start their own businesses.

The ministry recently launched what it says are “Women Empowerment Clubs” with the aim to assist women access funding, but concerns remain that the red tape involved in accessing the loans only enables a cycle of poverty for women.

Rights advocates say the high unemployment rate among women has meant that women have no access to the formal banking sector, where they access loans.

“Most banks and lending institutions require collateral for them to release loans which most women do not have. Profits from the informal sector are so meagre and only allow women to feed from hand to mouth,” said Sithabile Dewa, executive director of the Women’s Academy for Leadership and Excellence.

“In order to address these challenges, the Government must put in place laws and policies that protect women in small businesses, such as discouraging lending institutions from putting too much interest or demanding collateral on women, something they know they do not have,” Dewa told IPS.

While women have attempted to keep up with the volatile exchange rate, it has exposed their vulnerability to poverty at a time when agencies such as UN Women lament that women’s economic empowerment in Zimbabwe has been “impeded by their dominance in the informal sector and vulnerable employment.”

While saving clubs served as a bulwark against such uncertainties, Dewa says contemporary economic circumstances have made it near impossible to run such schemes that hedged against poverty.

“The savings clubs are still there though they have been modernised to meet the changing times,” Dewa said.

“The problems facing these clubs are hyper-inflation, an unstable and unpredictable economy. Those which are still viable are the ones being done using USD, but how many women have access to the foreign currency,” she added.

For now, women such as Mbewe and Dune continue to live hand to mouth, their ambitions to save for a rainy day effectively on pause.

“It’s harder now than ever, and the pain is that there is no sign this will end anytime soon,” Mbewe said, the little she makes selling sweets barely enough to meet her daily needs.

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A Guide on How Russian Oligarchs Dodge Sanctions — Global Issues

  • Opinion by Matti Kohonen (london)
  • Inter Press Service

LONDON, Jun 22 (IPS) – The author is Executive Director of Financial Transparency CoalitionThe sanctions against Russian oligarchs who hold billions of dollars have mostly failed to have a real impact beyond freezing a few yachts and properties. So, what went wrong? Now we know.

The “Rotenberg Files”, a mass leak of over 42,000 emails and documents, has showed how Russian oligarchs Boris and Arkady Rotenberg hid their assets and those of Vladimir Putin, using trusts and private equity investment funds, taking advantage of the lack of public beneficial ownership registries.

Since the Russian invasion of Ukraine in 2014 and especially since 2022, sanctions on Russian oligarchs and legal entities linked to the Russian invasion of Ukraine include 12,900 designations against Russia. Some estimates say that Russian oligarch offshore wealth is over US$1 trillion, but sanctions so far have only frozen US$58 billion, due to difficulty in establishing ownership.

Sanctions vary but have been mainly implemented by G7 countries and the European Union. Their effectiveness depends on setting up beneficial ownership registries that cover all possible legal vehicles, and the obligation to cross-check beneficial owners against sanctions regimes by a wide variety of professional enablers for due diligence purposes.

This has largely not happened. Despite progress in establishing centralised beneficial ownership registries, a commitment made by nearly 100 countries, very few of them are open to public access and are ridden with loopholes. In reality, global South countries are now leading the way in establishing effective BO registries after the European Court of Justice ended public access to EU-wide BO registries in November 2022.

This has allowed trusts to become the legal vehicle of choice by Russian oligarchs to hide their wealth. They are also very hard to detect as the presence of a trust deed can be kept at a lawyer’s office if there is no requirement to register the trust in a beneficial ownership registry. Many BO registries do require declaring trusts, but there are loopholes that allow for setting up trusts in jurisdictions that do not require registration of trusts or have loopholes regarding thresholds or exemptions. Only 65 countries require some form of registration of trusts.

Eight of the 18 BVI companies mentioned in the Rotenberg leaks were ultimately dissolved, and two relocated to Cyprus. This implies that Cyprus has become a key location to use trusts and other instruments to conceal ownership. As a European Union member, Cyprus was obliged to create a central register of beneficial ownership in line with the EU’s fifth Anti-Money Laundering Directive. Trusts based in Cyprus do come under this requirement, but the Rotenbergs used a loophole in the BO laws to conceal ultimate ownership that goes around the existing EU 5th Anti-Money Laundering Directive.

They effectively created a complex ownership structure around different entities in order to be below the trigger points for reporting beneficial ownership (in most cases 25 percent of control), yet still retaining control through power through potential voting coalitions in the complex structure that were concealed elsewhere. The structure used by the Rotenbergs involved a US entity that is owned by entities elsewhere, including Italy, the UK, Luxembourg, Cyprus, Bahamas (four entities), the British Virgin Islands and Cayman Islands,

Along with trusts, private equity firms have been revealed as another preferred vehicle to dodge sanctions. Investment vehicles called “closed mutual funds,” in Russian abbreviated as “ZPIFs,” held these assets. They are not considered legal entities under Russian law, and thus are not under obligations to reveal their shareholders to the authorities. The leaked files show that 13 ZPIFs were linked to the Rotenbergs.

To evade questions about the true nature of the beneficial owners, the leaked files show that “there is a practice where the General Director of the Management Company is recognized as the ultimate beneficiary”. The ZPIF’s invested in Russian companies, Monaco real estate, and other assets where beneficial ownership checks do not take place. Companies where they owned minority stakes could do business relatively normally.

Private equity and mutual funds are a global concern. According to a recent report, “Private Investments, Public Harm”, there are nearly 13,000 investment advisers in an $11 trillion industry with little or no anti-money laundering due diligence responsibilities in the USA, with the real possibility that sanctioned oligarchs use such vehicles to conceal their ownership. The US Enablers Act seeks to remove the exemption from due diligence checks from investment managers but the bill did not pass last December.

Art is another way to conceal ownership, as art dealers are not under any reporting requirements for money laundering purposes. A July 2020 report by a U.S. Senate subcommittee detailed an elaborate scheme in which the Rotenberg brothers spent more than US$18 million on art purchases in the months after they were sanctioned by the U.S. in March 2014. They acquired several artworks, including a US$7.5 million René Magritte, through a web of offshore companies based in Cyprus and the British Virgin Islands.

The tools to hide wealth used by Russian oligarchs to evade sanctions are exactly the same than the ones used by those behind natural resource crimes such as illegal, unregulated and unreported fishing, or indeed wealthy billionaires abusing laws to pay less than what they should in taxes. One cannot create a regime to just catch Russian billionaires. An overhaul of ownership transparency, from companies and trusts to art, vessels, aircraft and among other asset classes, including private equity and hedge funds, is required. Otherwise Russian oligarchs and kleptocrats around the world will continue dodging controls, keeping their shady money safely hidden.

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As Game of Thrones Rages in Sudan, the Neighbors Pay the Price — Global Issues

Long wait at the border between Sudan and Egypt. Credit: Hisham Allam/IPS
  • by Hisham Allam (cairo)
  • Inter Press Service

CAIRO, May 25 (IPS) – The conflict in Sudan is impacting the economy in Egypt, and those who make their living moving goods across the borders have spent weeks hoping the situation will normalize.

Muhammad Saqr, a truck driver, left Cairo with a load of thinners on April 13, heading to Khartoum. By the time he had arrived at the border, the battle had flared up. Saqr remained, like dozens of trucks, waiting for the borders to be reopened.

On April 15, 2023, clashes erupted in Sudan between the army led by Lieutenant General Abdel Fattah al-Burhan and the Rapid Support Forces led by Lieutenant General Muhammad Hamdan Dagalo, known as “Hamidti.” According to the UN, the clashes have resulted in hundreds of deaths and displaced more than a million people, with 840,000 internally displaced while another 250,000 have crossed the borders.

Saqr was stuck at the border for 28 days.

“We began to run out of supplies, and we reassured ourselves that the situation would improve tomorrow. Twenty-eight days passed while we slept in the open. The information we received from the bus drivers transporting the displaced from Sudan to Egypt convinced us that there would be no immediate relief. We knew that if we entered Khartoum alive, we would leave in shrouds,” Saqr told IPS.

“The merchant to whom we were transferring the goods asked us to wait and not return (home), particularly because he could not pay the customs duties due to the banks’ closure.”

Muhammad Saqr at the border of Sudan and Egypt.

Eventually, they returned with the goods to Cairo, Saqr said.

Mahmoud Asaad, a driver, was stuck on the Sudanese side of the border. Due to customs papers and permits, the livestock he was transporting had already been stuck in the customs barn in Wadi Halfa, Sudan, for thirty days. Then when the conflict broke out, the cows were trapped for another thirty days.

“We used to transport shipments of animals from Sudan to Egypt regularly,” Asaad explains. The average daily transport of animals to Egypt was roughly 60 trucks laden with cows and camels. This trade has stopped, and many Sudanese importers have fled to Egypt while waiting for the conflict to end.

“Sudan is regarded as a gateway for Egyptian exports to enter the markets of the Nile Basin countries and East Africa, and the continuation of war and insecurity will reduce the volume of trade exchange between the two countries, negatively impacting the Egyptian economy, which is currently experiencing some crises,” Matta Bishai, head of the Internal Trade and Supply Committee of the Importer’s Division of the General Federation of Chambers of Commerce, told IPS.

According to Bishai, commodity prices have risen significantly in recent months as the Egyptian pound has fallen against the US dollar. He also stated that the current situation in Sudan would result in additional price increases in the coming months, particularly for commodities imported from Sudan, such as meat.

Bishai explained that while Egypt had an ample domestic meat supply, it was nevertheless reliant on imports. Importing it from other countries such as Colombia, Brazil, and Chad would take longer and be more expensive than importing it from Sudan, as land transport is more convenient and cheaper than transporting the goods by sea.

According to Bishai, Sudan is a major supplier of livestock and live meat to Egypt, supplying about 10 percent of Egypt’s requirements. Higher meat prices will put additional pressure on Egypt’s inflation rates.

“Rising commodity prices, combined with the current situation in Sudan, are expected to result in higher inflation rates in Egypt in the coming months,” said Bishai.

According to data from the General Authority for Export and Import Control on trade exchange between Egypt and the African continent during the first quarter of this year, Sudan ranked second among the top five markets receiving Egyptian exports, valued at USD 226 million.

According to Ahmed Samir, the Egyptian Minister of Trade and Industry, the volume of trade exchange between Egypt and African markets amounted to about USD 2,12 billion in the first quarter of this year, with the value of Egyptian commodity exports to the continent totaling USD 1,61 billion and Egyptian imports from the continent totaling UD 506 million.

Mohamed Al-Kilani, an economics professor and member of the Egyptian Society of Political Economy, said: “The negative consequences will be felt in the trade exchange, which has recently increased and reached USD2 billion. Egypt has attempted to expedite the import process from Sudan by expanding the road network and building a railway.”

Credit rating agency Moody’s warned that should the conflict in Sudan continue for an extended period, it would have an adverse credit impact on neighboring countries and impact multilateral development banks. Moody’s added that if the clashes in Sudan turn into a long civil war, destroying infrastructure and worsening social conditions, there will be long-term economic consequences and a decline in the quality of Sudan’s multilateral banks’ assets, as well as an increase in non-performing loans and liquidity.

As the conflict entered its sixth week, attempts at a ceasefire have failed – with both sides accusing each other of violating agreements.

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