Commentary

Misinvoicing is very common in developing countries, says Economic Professor

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Leonce Ndikumana, a professor of economics at the University of Massachusetts, spoke about a groundbreaking UNCTAD-commissioned study he has written into misinvoicing in commodities trading -- a phenomenon that has led to massive loss of revenues to poor countries who depend on trading commodities like oil, copper and cocoa.

Mr. Ndikumana presented his findings at the Global Commodities Forum at UNCTAD14 on 15 July, 2016 in Nairobi, Kenya.

Q: Can you explain how trade misinvoicing works?

A: Trade misinvoicing consists of manipulations of exports and imports invoices by operators seeking to either secure foreign exchange advantages not reported to the relevant authorities, such as a central bank, and/or to avoid taxation or customs duties. It is detected by comparing the trade statistics of a country with those of its trading partners. Trade misinvoicing can occur both on the export and import side.

Q: How so?

A: On the export side, exporters, both firms or individuals report an amount which is less than the true value of the goods exported, so as to keep the difference abroad. On the import side, importers exaggerate the cost of the goods to be purchased abroad so as to obtain extra foreign exchange from the central bank. The extra foreign exchange is invested or spent abroad.

In both cases, the country incurs a loss in foreign exchange, hence capital flight. Imports may be "underinvoiced" to minimize customs duties. Imports may also simply not be reported at all -- which is basically smuggling (Editor's note: The loss is often larger when goods are exported without reporting. When the goods are imported, the loss is mainly lost customs revenue - otherwise, the country may benefit from having the goods). Also exports may "overinvoiced" -- this benefits operators where tax incentives have been established to promote export-oriented activities.

Q: Why has no-one done a study like this before (by country / by commodity)?

 

Uganda’s Ambitious Infrastructure Plan Set to Boost Economy

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ECONOMIC HEALTH CHECK

Uganda’s Ambitious Infrastructure Plan Set to Boost Economy

By Ana Lucía Coronel
IMF African Department

July 7, 2015

  • Infrastructure investment is government’s top medium-term economic priority
  • Upgrade plan to be backed by sound fiscal policies, efficient project management
  • Targeted social protection to help those not benefiting directly from upgrade

A ten-year, multibillion-dollar plan to upgrade Uganda’s transportation network and power generation is poised to benefit the East African nation’s citizens and those of neighboring countries, IMF economists said.

In their regular review of the Ugandan economy, IMF staff said that the planned infrastructure overhaul—an $11 billion program over the next ten years through public investment and public-private-partnership arrangements—will have positive spillovers on agro-processing, manufacturing, and trade.

Upgrading the transportation network and electricity generating capacity is now Uganda’s top economic priority. Over three fourths of Ugandans live in rural areas with most involved in agriculture, and only 14 percent of households use electricity. A comprehensive road network and widespread access to electricity will connect farmers to trading centers, add value to production, and improve the population’s welfare.

 

World Bank commits to lift one billion people out of extreme poverty by 2030

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By Jim Yong Kim

Before I begin, I want to pause to remember the 147 students at Garissa University College in Kenya who were senselessly murdered just a few days ago. Schools are sacred grounds, and all who study there should be safe. Let us reflect for a moment.

Just 15 years into the new millennium, economic development in poor countries and emerging markets is at a critical crossroads. Much of the attention has been on the near horizon – concerns about the slow-moving global economy, uncertainties over the price of oil, and conflicts from the Ukraine to the Middle East to parts of Africa. But when we look at the longer term picture, we see that the decisions made this year will have an enormous impact on the lives of billions of people across the world for generations to come.

2015 is the most important year for global development in recent memory. In July, world leaders will gather in Addis Ababa to discuss how we’ll finance our development priorities in the years ahead. In September, world leaders will come together at the United Nations to establish the Sustainable Development Goals – a group of targets and goals set for 2030. And in December, world leaders again will gather in Paris to work out an agreement based on government commitments to lessen the severe short- and long-term risks of climate change.

 

“We must promote freer trade that provides greater access to markets for the poor and enables entrepreneurs in low- and middle-income countries to grow their businesses and create new jobs. Fourth, we must invest in health and education, especially for women and children. And finally, we must implement social safety nets and provide social insurance, including initiatives that protect against the impact of natural disasters and pandemics,” says Yo kim

 

How to stop Ebola – and the next outbreak

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By Jim Yong Kim and Nkosazana Dlamini Zuma

For only the third time in its 66-year history, the World Health Organization has declared a global public health emergency.

This time it is for the Ebola outbreak in the three West African countries of Guinea, Liberia, and Sierra Leone. After their traumatic ordeal in recent months, governments and communities in those three countries are looking desperately for signs that Ebola can be stopped in its tracks.

As medical doctors who understand well both the continent of Africa and infectious disease control, we are confident that the Ebola virus disease response plan, led by both the countries and the World Health Organization, can contain this Ebola outbreak and, in a matter of months, extinguish it.

Let’s also keep in mind that this is not an African problem, but a humanitarian one that happens to occur in a small part of Africa.

The emergency response must focus on four key areas.

First, we must support health workers who are the front line in fighting this epidemic. They have paid too great a price thus far with close to 100 workers having lost their lives attending to the sick.

 

EAC region can still sign trade deal with the European Union by October, says official

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By Karanja Kibicho

Recently, I led the East African Community-European Union delegation to a meeting in Kigali, Rwanda, that had been convened to resolve three outstanding issues on Economic Partnership Agreements (EPAs).

For some time now, the EAC-EU have been negotiating on how to engage in trade, and before Kigali, eight issues out of 11 had been resolved. The three outstanding issues include tax and duties on exports; export subsidies provided to farmers in the EU; and non-trade provisions in the Cotonou Partnership Agreement.

Although the meeting did not agree on these issues, we made a lot of progress. What remains now is to agree on a few points of concern, basically to do with the phrasing of some sentences.

The issues have now been escalated to the ministerial level. It is our hope that agreement shall be achieved quickly at this level and the parties will just initial the agreement and beat the October 1 deadline.

 

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