Higher Prices Could Undo Africa Growth- World Bank

“Higher food and fuel costs, together with poor infrastructure and falling aid levels, threaten to undo several years of strong growth in Sub-Saharan Africa, the World Bank cautioned on Tuesday. …

‘This is the season to find means of cushioning the impact of the pain that comes from these rising trends, but it is also a time to stay focused on reforms and embracing transparency, staying with the rules of the game, and understanding that markets are very important for growth,’ [Oby Ezekwesili, Vice President for Africa at the World Bank said]…

In addition, Ezekwesili said …in some farm-rich areas, poor roads and railways hampered farmers' ability to get food to market. She estimated that Africa needs $22 billion annually in new infrastructure investments to meet its need for better roads, railways and electricity, and an additional $17 billion to $18 billion to maintain existing infrastructure. …” [Reuters/Factiva]

AFP writes that “…Ezekwesili said the continent's economy is growing 5.4 percent on average, not yet the threshold pace to produce a decline in poverty. ‘Any kind of exogenous shocks such as what we see with the rising food and rising energy prices can potentially derail that trajectory of growth,’ she told a news conference. ‘The issues of Africa could not be more important for the global agenda,’ the former Nigerian Education Minister said. …

The World Bank official cited a number of current drawbacks to agricultural production, from the aging population of farmers and policy neglect to a lack of technology and water. However, the current food crisis ‘could be an opportunity for Africa,’ she said. ‘Rising food prices should stimulate supply.’ In the majority of Africa, she said, ‘we see a commitment to reforms that surpasses what was in the past.’ ‘The private sector is the most important engine of growth,’ replacing what used to have been government-led growth. …” [Agence France Presse/Factiva]

OECD Predicts Subprime Losses To Hit Dollars 420 billion

“Losses from the collapse in the US subprime mortgage market will total between $350 billion and $420 billion, according to an analysis published yesterday by the Organisation for Economic Co-operation and Development (OECD). The figure contrasts with the hair-raising Dollars $945 billion estimate given by the International Monetary Fund (IMF) last week.

The OECD had previously put subprime losses and write downs at about $300 billion, based on market prices last September, but it said the market panic had distorted pricing so much this method was no longer reliable. Its new estimates assume that lenders would recover 40-50 percent of foreclosed loans, if growth and unemployment were similar to the recession of 2001 but house prices weaker than in the early 1990s. …” [The Financial Times (UK)]

WSJ notes that “…In the report, titled The Subprime Crisis: Size, Deleveraging and Some Policy Options,  the Paris-based research group, whose members are the world's developed countries, estimated the crisis will cost commercial banks in the U.S. about $60 billion in losses - assuming a recovery rate of around 40 percent.

Since banks hold about $9 in assets for each dollar in capital, a $60 billion loss would reduce total assets by $548 billion, or 5.4 percent, ‘assuming no new capital is injected, and that there is no socialization of the losses,’ it said. …

In the recession of the early 1990s, which was driven in part by losses on real-estate loans by banks and thrifts, commercial-bank assets didn't decline in nominal terms. ‘The magnitude of the decline in nominal bank assets now projected by the OECD would imply an exceedingly heavy impact on [gross domestic product], and hence cannot be allowed to happen,’ the report said. …” [The Wall Street Journal/Factiva]

AFP reports that “…The OECD also said Tuesday that the crisis had revealed a need for a fundamental overhaul of the financial system, including better regulation…‘Central banks have taken various steps to calm the markets, but concerns remain and the situation is not fully resolved,’ said [OECD Financial Markets] committee chairman Thomas Wieser, who also heads up the Austrian finance ministry. …

An OECD statement said that while priority should be given to private sector initiatives to speed the recovery of financial markets, government intervention might also be needed.” [Agence France Presse/Factiva]

Reuters notes that “Europe is more vulnerable than many think to the global financial markets crisis and would be especially so if trouble spread to the trillion-dollar equity derivatives market, OECD officials said on Tuesday.

The OECD raised its estimate of likely bank losses caused by the subprime crisis to $350-420 billion on Tuesday and flagged a range of policy issues, including recapitalizing banks and, as a last line of defense, doing so with public funds. …” [Reuters/Factiva]

United Nations Food Agency Faces Stark Decisions

“The UN food agency will need to make ‘heartbreaking’ choices about the destinations of its emergency aid unless governments donate more money to help it buy increasingly expensive food, a spokeswoman warned yesterday.

Christiane Berthiaume of the World Food Program (WFP), which aims to feed 73 million people in 80 countries this year, said sharp rises in the price of wheat, corn and other staples meant many people ‘already living on the razor's edge’ may lose access to critical food aid.

‘If by this summer we don't receive more, we will have to make quite heartbreaking choices − either we reduce the beneficiaries or we reduce the rations,’ she told a news briefing in Geneva. …” [The Guardian (UK) and Reuters/Factiva]

AFP notes that “… Many WFP donors attach conditions to their support - …These factors combine to put African and other developing nations at a twofold disadvantage.

…‘Chopra called on the WFP to invest in local food production in Africa and to provide countries with the necessary technical assistance. …” [Agence France Presse/Factiva]

In related world hunger crisis news, AP writes that “…Josette Sheeran, Executive Director of the WFP, told more than 700 people gathered in Kansas City for the International Food Aid Conference that the time has come for governments around the world to invest in their farmers.

Half of hungry African farmers cannot afford to feed their own families, she said. In Laos, farmers are planting a third fewer crops partly because they have no access to credit to buy seed and fertilizer. In many countries, remote farmers cannot access markets because of poor roads, she said.

In addition to taking care of immediate needs and stabilizing shortages, Sheeran and other aid leaders are backing proposals to buy more food from local farmers in developing countries, cutting transportation costs while bolstering those nation's agricultural economies. …” [The Associated Press/Factiva]

Meanwhile in a separate piece, AFP reports that “The increase in food prices is leading not only to empty stomachs but also empty classrooms in poor countries as parents send their children to work rather than school, UN International Children's Emergency Fund (UNICEF) warned on Tuesday. The higher prices are making families ‘reduce their budget, to cut down on education and to remove their children from school to make them work’ said Veronique Taveau, spokeswoman for the UN children's agency. …

A drop in school attendance is already being observed in Nepal, said Berthiaume. The country is particularly vulnerable as it depends on food imports from China and India, which are restricting exports, said Berthiaume. In many countries, the only warm meal children get in a day is the meal served in school canteens, she added. …”   [Agence France Presse/Factiva]

EU, Montenegro Sign WTO Accession Agreement

“The EU signed an agreement with Montenegro on Tuesday opening the way for the former Yugoslav republic to join the World Trade Organisation (WTO).

‘Today's signature is …good news, showing the progress Montenegro is making on its EU road,’ European Enlargement Commissioner Olli Rehn said in a statement. WTO accession is crucial to fostering economic and trade reforms needed to build a functioning market economy required for EU membership, he said. …” [Reuters/Factiva]

Dow Jones notes that “…The EU is the first WTO member to conclude bilateral talks on Montenegro's accession, and the agreement completes bilateral negotiations which began in 2005. … ‘Our consistent work has brought us one step closer to accession...we will now step up our efforts to also complete bilateral negotiations with other WTO members,’ said Montenegro's Vice Prime Minister Gordana Djurovic, adding he was confident Montenegro could join the WTO before the end of the year. …” [Dow Jones/Factiva]

HINA adds that “…The agreement was signed by Montenegro's Deputy Prime Minister Gordana Djurovic and the European Commission's Director General for Trade, David O'Sullivan. …” [HINA (Croatia)/Factiva]

Econ Forum Leaders: Latin American Can Weather A US Recession

“Strong economic growth is still possible throughout Latin America despite a sharp downturn in the US economy, top business and government leaders said at a regional economic forum Tuesday in Mexico.

Latin America has seen five straight years of more than 5 percent annual economic growth - based partly on maturing free-market and political reforms that are letting the region diversify both its economies and world partnerships. …Also challenging the region are its deepening political differences, poverty, lawlessness and persistent corruption. …” [The Associated Press and Dow Jones/Factiva]

AP writes that the meeting which started “…Tuesday and is an offshoot of the famed summit held yearly in Davos, Switzerland, will emphasize a ‘reform agenda’ based on free-market policies many Latin American countries have implemented since the 1980s, and will seek ways of ‘supporting the productive sector rather than focusing on ideologies,’ Emilio Lozoya Austin, head of Latin America for the World Economic Forum, said in a news release. …

Also high on the agenda is energy security. Soaring world crude prices are pushing major oil producers including Brazil and Mexico, as well as private investors, to examine production, consumption and price trends to determine how best to thrive in the increasingly volatile market. …The forum also plans to spotlight alternative energy solutions. …

The forum, co-hosted by China Construction Bank Chairman Guo Shuqing, will also explore the Asian power's growing relationship with Latin America, as trade with the region swells and Latin America looks to draw investment from China's increasing pool of capital.” [The Associated Press/Factiva ]

Xinhua notes that “China has poured 25 percent of its total overseas investments into Latin America, a Chinese trade official said here Tuesday. China's direct investments abroad amounted to $90.63 billion by the end of 2006, according to figures released by the Commerce Ministry of China.

The investments in Latin America will increase as ties between China and the region are being strengthened, said Wang Jinzhen, vice president of China's International Trade Promotion Committee, at a special forum on Chinese investment in Latin America, held prior to the World Economic Forum from Wednesday to Thursday. The official said Chinese enterprises are engaged in 30,000 projects in Latin America at present. …” [Xinhua/Factiva]

Also in this edition; Briefly Noted

Honduraslaunched a $119 million plan on Tuesday to ramp up agricultural output this year to mitigate rising food prices. Agriculture Minister Hector Hernandez said Honduras aims to increase annual corn production by almost a third to up to 23 million 100-pound (46-kg) bags this year, compared to 2007. [Reuters/Factiva]

Food prices have risen 21 percent in China so far this year, fuelling concerns about inflation in the economy and the affordability of basic staple goods. The surge was confirmed by the National Bureau of Statistics, which also revealed that economic growth eased slightly in the first quarter. [BBC News (UK)]

The leaders of Senegal, Algeria, Ethiopia and South Africa met on Tuesday to discuss the New Partnership for African Development (NEPAD). [Reuters/Factiva]

China’s economy expanded by 10.6 percent in the first quarter of this year, despite widespread disruption from ice storms and power cuts to industry and transport in January and February. The first quarter was only marginally slower than the final three months of 2007, when growth was 11.2 percent, underlining China’s resilience in the face of a slowing global economy. [The Financial Times (UK)]

Countries lashed by tornadoes, earthquakes, tsunamis, floods and other natural disasters in the Southeast Asian region will be provided funds within 24 hours by the World Health Organisation (WHO). WHO's health emergency fund has $1 million as seed money with one percent contributions from 11 Southeast Asian countries, WHO Deputy Regional Director Poonam Khetrapal Singh said Tuesday. [Indo-Asian News Service/Factiva]

Kisan Baburao Hazare, popularly know as Anna Hazare, a pioneer in developing an ecologically self-sustaining village as a global model, has become one of the three recipients of the World Bank's 2008 Jit Gill Memorial Award for Outstanding Public Service, the Bank announced on Tuesday. [Times of India/Factiva]

Bulgaria has repaid early a loan from the Japan Bank for International Cooperation worth $45.31 million, including interest, the Finance Ministry said on Tuesday.   The payback is a consequence of the early retirement of six loans to the World Bank last month, worth EUR 267 million euros and $12.8 million, the ministry said. [Reuters/Factiva]

Lebanon Finance Ministry on Tuesday released the fifth progress report on the Paris III donor conference that pledged $7.7 billion to Lebanon. [Daily Star (Lebanon)/Factiva]

Japanis to become the first country in the world to vaccinate thousands of officials against bird flu. Six thousand health workers and other staff will be inoculated over the next few months, and the program might be extended to cover millions more. [BBC News (UK)]

US President George Bush will endorse an intermediate goal Wednesday for reducing greenhouse gas emissions, but he will not put forward any specific legislation or proposal on how the goal should be met, White House officials said. In an afternoon address in the Rose Garden, Bush will also reiterate his long-standing opposition to mandatory emissions regulations without simultaneous agreements from large developing nations such as India and China, officials said. [The Washington Post]

The Bank of International Settlement's regulatory panel Wednesday unveiled measures aimed at making the banking system more resilient to shocks such as the credit crunch currently roiling markets. The Basel Committee of Banking Supervision said it will introduce stronger risk management measures, better valuation of assets and disclosure, more liquidity, and said it seeks to strengthen Basel II regulation to include complex structured credit products. [Dow Jones/Factiva]

Buyers of carbon credits should beware of the poor quality of some of the credits on offer, according to a new study of the market to be published by Environmental Data Services (ENDS). Only 30 of 170 companies offering carbon offsets were quality providers, ENDS said. [The Financial Times (UK)]