2012 ATPS Annual Conference Blog
EMERGING PARADIGMS, TECHNOLOGIES AND INNOVATIONS FOR SUSTAINABLE DEVELOPMENT: GLOBAL IMPERATIVES AND AFRICAN REALITIES
Emerging Paradigms, Technologies and Innovations for Sustainable Development: Global Imperatives And African Realities
The quadruple challenges of imploding economies, deepening and widening poverty, climate change, and disappearing environmental assets (natural resources and biodiversity) around the world necessitate a careful rethinking of knowledge platforms and development pathways at global, continental and national scales. With the recent global financial crisis and deepening social and environmental crisis in the past decade, science experts and policymakers alike are united in the search for alternative development paradigms. Major global policy support institutions such as the World Bank (WB), the United Nations (UN), Organization for Economic Cooperation and Development (OECD) amongst others, now sing the same song “there is need for new paradigms and pathways for economic growth that is inclusive of social and environmental sustainability”.
A recent report launched by the World Bank (2012) aptly concludes that, “inclusive green growth is necessary, efficient and affordable,…, the search for solutions needs to shift from the search for more financial resources, to “getting smart”. In the same vein, the recent Global Green Growth Summit held in South Korea, re-echoed the collective voice of global leaders that “technological innovations will be central to the creation of a new and more sustainable development paradigm”. Many global assessments and reports now converge in the conclusion that having the right kind of science, technologies and innovations is at the heart of sustainable development (UNESCO, 2010, UNEP 2011, UNDP 2012, UNCTAD 2012, World Bank 2012). Be it the first and second carbon intensive industrial revolutions which are now foundering or the third industrial revolution which is now evolving under different nomenclatures (Green Economy, Green Growth, Inclusive Growth, Climate Resilient Economy, Low Carbon Economy, etc.), STI has remained the constant driver of productivity and efficiency gains in economic development history.
In June 2012, world leaders, the academia, the private sector actors and the civil society convened in Rio De Janeiro, Brazil under the auspices of the United NationsUN Conference on Sustainable Development. Reconnaissance surveys in Africa suggested that 20 years after the first Rio conference, stakeholders’ expected more proactive and practical actions in addressing poverty, hunger, energy access, energy security, efficient and sustainable resource use and ecosystem management, improved agricultural value chain management, etc. The general feeling amongst policymakers and policy analysts consulted was that the global governance architectures be it in the socio-political, economic or environmental realms still leaves Africa disadvantaged in many ways. This is largely due to lack of political will to implement negotiated agreements and international commitments; global mechanisms and institutions that favour binomial relationships between the global north and the global south with knowledge, technologies and innovations predominantly flowing from the former to the latter; and general inequities in the distribution of skills and capacities for innovation and wealth creation. The Ministers of African States have therefore aptly noted that the critical foundation for sustainable development must include more inclusive global governance; strong and responsive pro-poor institutions for wealth creation, social equity and equality; poverty eradication and environmental sustainability, as well as sustained progress in the achievement of internationally agreed commitments including the Millennium Development Goals (MDGs). They called on Rio+20 to reinvigorate political will and international commitment to implementing the goals and ideals of sustainable development and urged developed countries to proactively fulfil previous commitments and pledges to help Africa’s efforts to achieve sustainable development.
The optimism that the Rio+20 conference outcomes was were expected to deliver greater global commitment to sustainable development and encourage countries of the global north to step up development assistance to African countries was well placed. However, a pragmatic assessment of global development trends and resource potentials suggest Africa is on the move (UNDP 2012), and the technical resource and productivity potentials for green growth is substantial. Huge opportunities therefore exist for home grown development on the continent, but the STI capacities of the African countries to effectively participate in harnessing these comparative advantages remain dismal (Urama et al., 2010). Though Africa’s scientific capacities and Gross Domestic Products (GDP) growth have improved during the past decade, technological and innovation capacities remain low and the requisite institutional and governance infrastructures are only just emerging (Urama et al., 2010; UNESCO 2010, UNDP 2012). Whereas there are pockets of success in application of STI including the mobile telephony and telecommunications, among other factors, which contributed to the sustained economic growth in the continent during the past decade, the continent generally lags behind in skills and competencies required to fully reap the benefits afforded by STI for its development. This can be attributed to many factors, but key amongst these are the lack of skills and capacities in the area of STI to guide and foster an African development agenda, inadequate implementation of STI policies and programmes, and limited political commitment.
It is expected that as the world “gets smarter”, transitions away from hydro-carbonated industries and natural resource intensive economies will be imperative. Continued reliance on cheap exports of primary resources will not only be environmentally unsustainable and economically inefficient, but also socially unacceptable. Building STI capacities, knowledge systems and structures, knowledge circulation and networks, and effective valorization of STI knowledge will therefore be the bedrock for sustainability of nations in the coming decades.
Africa cannot afford to remain recluse of the emerging global realities and social, economic and environmental challenges of climate change, biodiversity loss, deepening water stress, energy price hikes, etc.; neither should she remain a global consumer of knowledge, technologies and innovations in the new global economy, the architecture of which is emerging today. The first Africa Forum on STI hosted by the Republic of Kenya from 1-3 April 2012 and co-organized by African Development Bank (AfDB), African Union Commission (AUC), United Nations Economic Commission for Africa (UNECA), United Nations Educational, Scientific, and Cultural Organization (UNESCO) and Association for the Development of Education in Africa (ADEA), called for African countries to, among other things, design STI policies and programs to implement strategies to support inclusive growth, employment opportunities, and sustainable development in Africa.
The international conference and workshops convened by the African Technology Policy Studies (ATPS) and its partners will reflect on a post-Rio+20 futures for Africa. To make good global commitments to sustainable development in Africa, we believe that African countries would need strategic transformative reforms in its knowledge structures (from mono-disciplinary certificate education to trans-disciplinary systems studies, entrepreneurship and innovation capacity development); institutions and governance structures (from neo-colonial knowledge dependence to governance structures that are fully embedded in Africa’s socio-political, economic and cultural realities); Agricultural systems research and policy (from focus on incremental productivity enhancing measures to value chain approaches and technologies that may enhance quantum leaps in value addition including on-farm factor productivity improvements, enhanced shelf life and market value of agricultural products); knowledge circulation and networks (to enhance intra-African knowledge flows and networks), and development pathways to enhance transitions towards poverty reduction and wealth creation for inclusive green growth and development on the continent.
Discussion Questions:
- As during the previous development eras, Africa has huge comparative advantages in natural capital and renewable energy resources that are the bedrocks for green growth. The scramble for resources in Africa during the previous industrial development eras has little dividends for development on the continent. What must Africa do differently now to ensure proper beneficiation from its natural resources to deliver more inclusive growth on the continent?
- Technology enthusiasts argue that unless Africa builds endogenous capacities in science, technology and innovations, it would remain an appendage in the global economy, be it “brown” or “green” growth pathways that are pursued. On the other hand, “globalisation enthusiasts” believe the technology transfers from the global north and increasingly China would help Africa to leap frog the development process, avoiding the huge costs of building required knowledge infrastructures which are obviously expensive. Which way should Africa go and how best should it seek to achieve the transition from where it is now, and where it should go?
- Much of the science, technology and innovation efforts in Africa as well as the thinking on green growth strategies are spearheaded and funded by development partners. Only few countries in Africa invest close to 1% of its GDP on research and development efforts. Can Africa take the lead in its development efforts without proactive endogenous investments in science, technology and innovations? What must African governments do to reverse the trend?
- African Universities and Colleges of tertiary education have now come of age. However, research evidence show that most of them lack the required funding and skill base to be competitive in the global knowledge market. Global rankings of Universities therefore seldom list African Universities, except a few. What could be done to make African Universities more competitive globally and relevant to sustainable development in Africa?
- One of the great assets of Africa is its youthfulness. However, African youths and women and seldom engaged the development process. With high youth unemployment rates and sub-optimal involvement of African youths and women in the African development policy planning and implementation, this great asset is increasingly becoming a ticking time bomb in many African countries. Youth and Women fora initiated in Africa the African Youth Forum for STI (AYFST), and the African Women Forum for STI (AWFST), often struggle to receive financial support from African governments. What could African governments do to optimally engage its youth and women meaningfully in its development struggle?
- What roles do you see pan-African institutions whose mandate is to strengthen Africa’s STI capacity for sustainable development play in the transitioning process. What relationships should exist between such institutions and Apex policy institutions on the continent such as the Africa Union Commission (AUC), the New Partnership for African Development (NEPAD), the sub-Regional Economic Communities, national governments and associated ministries?
Prof. Kevin Chika Urama
Executive Director, ATPS
Some ideas on Boosting exports from the Pakistan experience
Pakistan EXIM units have to raise USD capital for working capital finance in the COVID doom
Anyone can raise capital in USD today – irrespective of central bank caveats.2 years ago,it was unviable and difficult. Today, it is VIABLE and EASY – all due to COVID.
Pakistan has staged a miraculous COVID turnaround and this is the next turn – ULTRA LOW COST FINANCE.dindooohindoo
Case 1
Take the US LIBOR (6 months BBA) at 30 BP in August 2020,id.est 0.30 %
Assuming a spread of,say 50 BPs for a bank like Habib Bank – a 1st Class Scheduled Bank (as it gets the LOC or Borrowing on the strength of its Balance sheet)
Habib will onlend it to Pakistan SMEs at say a spread of 150-250 BP
Aggregate USD lending rate will be 1.8 to 2.8%
If the borrower is an exporter,and is raising Packing credit,which will liquidate in 3 or 6 months – he keeps an open exposure on the USD loans,qnd offsets it with the USD export collections
It SOUNDS good – but it is not a CERTAIN gain,as there CAN BE an OPPORTUNITY loss
If PKR falls by 5 % in 6 months and if Export Packing Credit is available in PKR at,say 9%,then post the PKR rupee loss,the NET COST of the Packing Credit,in PKR = Minus 100 BP.
But still there are people who do not want to take any view on the PKR/INR markets – and so,they want to borrow in USD so that they have outsourced their FX nominal risk,to a neutered FX exposure
SO HOW SHOULD PAKISTANI ENTITIES,RAISE USD LOANS ? It is fairly simple ! There are 3 Options
Option 1
1st Take the Export Packing Credit loan in PKR,at say,750-1000 BPs of say 500 Million PKR (as banks do not want to lend in USD,as then,no one will take PKR loans !)
Assume this is a 6 months credit,and so,exports are expected at 1 Billion PKR in 1 year
For 50% of the borrowing,and assuming exports as above,the borrower should short the dollar (forwards only) and get a premium of say between 500 – 900 BPs,at various points of time
So on a Net basis,you have a USD borrowing of 50% of 500 Million PKR,at 250 – 100 BP,and it is on TAP,as the entity will drawdown the Packing credit,when it wants,and short the USD,when it wants
On the Date of the liquidation of the Forward contract,he has to get the USD “FROM SOMEWHERE”.Even if there is a War,the borrower will MANAGE to get the USD from somewhere
Option 2
If the prospective borrower is an exporter,then he should import duty free on duty free licences.
For that he will need to import,and so,will need to import,on Import Usance LCs or Buyer LCs
In a LC,the overseas supplier,is taking a risk on Habib Bank (who opens the LC) and the UCP Rules
With 6 Months US Libor at 0.30%,the supplier can give a 6 months LC credit at Nil interest rates (subject to his exposure norms)
Some suppliers and overseas banks,MIGHT not accept Habib Bank LCs,and so the LCs will need to be confirmed (with confirmation charges)
A Pakistani exporter with a 200 Million USD Top line,should be able to open LCs on an annualised cost of 125- 150 BPs
A Pakistani exporter with a 500 Million USD Top line,should be able to open LCs on a FIXED advalorem cost of say 100 USD per LC – which will make the annualised cost close to ZERO %
But if such an exporter needs to pay a % fees,then he should enter into clean credit discounting arrangement or a factoring/forfaiting deal,with some international bankers in London/Singapore etc or use the discounting limits of the suppliet.
For those exporters who cannot open LCs – they can use 3 rd party financiers to open the LCs,and convert their finance cost,into USD,And then, the LCs can be Rolled on and on and on – until the SBP calls up the borrower
So,in import finance,if the LC costs are lowered or converted into a fixed value,and LC confirmation is waived by the foreign supplier or his bank – a Pakistani exporter can easily raise working capital finance at ZERO % cost,IN USD (and set off the LC retirement, with the foreign remittances).
This all excludes LC engineering like Transferable/Diviisble LCs etc.
But the cost can be made NEGATIVE easily, if the imports are on Duty Free Licences,from a Front company,in say,Dubai.
So if the importer overstates the LC amount – he raises an ECB at Zero % cost or Near Zero Cost – and the extra funds,are parked with the Front company for rotation.The PKR hedged
cost of that extra fund,will be less than the Habib Bank PLR
Option 3
Even for Pakistani entities who have no exports,their imports can be financed at 100-200BP per annum,on LCs or on Clean Credit (for regular importers)
Even after loading the FX premiums the loaded cost should be 6-8%,which will be much lower than the CP or CD rates in Pakistan
For Regular importers with perfect payment history,the suppliers can do recourse and non-recourse financing, by discounting the drafts on the Pakistani importers,or holding the bills to maturity (obviating the LC)
Better still,the overseas suppliers can discount the drafts on Pakistani importers,with Pakistani Billionaires in London – who are parking their cash in the call market at 0.10%.They can be offered 100 BPs !
In some cases,the Pakistani Importer and the Pakistani Billionaires,might be the same person,but with different legal entities
The Problem
The Problem is that Pakistani Banks find “not so creative” tools,to make USD financing unviable,for Pakistani entities – by loading ad valorem % charges,which on an annualised basis,make the transaction unviable
Hence,at least for imports (unlike exports,where an exporter can short the USD to swap the PKR loan into a USD Loan),the Pakistani entities have to use supplier financing,and tie up with banks,in London etc., to discount,negotiate,factor and forfait their bills/drafts.
Basically,it is the Country Risk of Pakistan (created by Indian Vilification) which causes the chain of confirming,advising and other charges,which make the LC transaction unviable, from Pakistani Banks.
Many Pakistani exporters will have a payment rating and credit rating – HIGHER THAN THE PAKISTAN SOVERIGN and also,that of HABIB bank (as Habib is exposed to the economic and credit risk,of Pakistan and its Banking system)
Hence,the time has come for some Pakistani Millionaires and Billionaires to use their surplus cash parked in T-Bills etc., to open a EXIM bank in London or Dubai,to use creative exim financing options ONLY for Pakistani Exporters and Importers (beyond a certain size).That will slash the costs of Pakistani EXIM units,and also,the said EXIM bank,can be used to offer innovative credit default options,on clean credit exports,by Pakistani exporters,to Africa and other nations.
If the Pakistani Millionaires put in,say USD 50 million,in equity and raise USD 200 in debt,then in one year,their primary discounting and financing business,assuming a 3 months tenor,will be a Billion USD,and if they start offloading and re-discounting the bills,with other bankers and financiers – the aggregate financing turnover,should be 10-15 Billion USD – on a seed of USD 50 Million.There is no way,the millionaires will earn that kind of yield,in any Junk Bond in the world
Only a Pakistani can appraise the credit and intent of a Pakistani borrower,and also,have the ability to make the borrower PAY.