World Bank Highlights Economic Progress Of Colombia

“The president of the World Bank on Thursday stressed the sustained economic progress of Colombia, but stated that the country pays a higher cost of infrastructure compared to other nations…He said that his main reason for coming to this country was in a letter he received from President Alvaro Uribe to have a clearer picture of the country, ‘to listen and learn about how we can be a better partner for Colombia.’ …” [Spanish AP Worldstream/Factiva]

Reuters reports that “The US Congress should pass the Colombian free trade agreement to help the Andean country reform and strengthen its economy and improve its democratic institutions, the World Bank said on Thursday. …‘It is important beyond trade because it is part of a series of reforms that support the overall agenda of Colombia, whether it be security, human rights issues and anti-narcotics efforts,’ Zoellick said during a trip to Bogota. ‘It is part of a package supporting the success of Colombia.’…” [Reuters/Factiva]

Meanwhile EFE writes that “…Zoellick urged participating countries of the Bank of South to promote transparency and good governance to overcome corruption, and welcomed all projects that seek to support development in the hemisphere. … ‘development is not just a question of money, is a matter of good governance, good laws, transparency in trying to overcome the risks of corruption,’ said Zoellick at a press conference together with the Colombian minister of Finance, Oscar Ivan Zuluaga.

During his first official visit to Colombia as World Bank President Zoellick met for over an hour with Uribe and members of his cabinet to discuss the FTA, discuss a new strategy for economic growth and address the global crisis of food. …

Zoellick also met with the mayor of Bogota, Samuel Moreno, and his team to discuss the challenges of urban transport in the Colombian capital and confirmed that the World Bank stands ready to cooperate in developing a subway system in the city, through technical and financial assistance. …” [EFE/Factiva]

Energy, Commodity Demand, Prices Seen Holding - IMF

“Rising energy and commodity prices are central to inflation concerns, and despite a global growth slowdown, demand and prices were expected to hold firm, International Monetary Fund (IMF) … First Deputy Managing Director John Lipsky said, speaking at the Council of Foreign Relations in New York.

The recent spike in energy and commodity prices is reflective of fundamentals and is already causing food shortages in some poor countries, Lipsky said. ‘With only temporary relief likely, we expect that agricultural prices will remain high for the foreseeable future as supply responses may require both new investment and policy reforms,’ Lipsky said. … ‘Emerging and developing economies as a group have accounted for about 95 percent of the growth in demand for oil since 2003,’ Lipsky said.

While agricultural production and transportation costs have responded to rising oil prices, real food prices remain well below previous peaks by historical standards, Lipsky said. Some countries have installed export restrictions to ensure that domestic populations have sufficient food, but these are negatively impacting those that rely on food imports. …” [Reuters/Factiva]

Dow Jones adds that “The IMF urged central banks in developing nations to raise interest rates to fight inflation caused by rising fuel and food costs. The message was aimed particularly at Russia, Saudi Arabia, China and countries in Eastern Europe where inflation has picked up substantially. ‘For emerging economies with currencies closely linked to the dollar that are fighting overheating concerns, macroeconomic policies need to be tightened in response to generalized inflation pressures,’ said Lipsky…

Countries should reduce subsidies and price controls on fuel, so that consumers feel the full effect of the price increases and thus cut back on purchases. He said that some subsidies were warranted 'to buffer consumers from brusque price shifts.' He also urged Middle Eastern oil exporters to focus their spending on infrastructure so they can speed more supply to the market.

To reduce pressure on food prices, he urged a reduction in biofuels subsidies. …He also urged developing countries to boost agricultural productivity and end export restrictions on rice.” [Dow Jones/Factiva]

FT writes that “…Lipsky said the forces pushing commodity prices up appeared ‘to be fundamental in nature’ - and were amplified by lower US interest rates and a decline in the dollar.

He added that policymakers must respond aggressively to any sign of rising inflation expectations ‘lest the impressive gains in global stability attained in recent years be sacrificed’.” [The Financial Times (UK)]

Major Banks Agree To Strengthen Environment Guidelines

“Major financial institutions from around the world Thursday agreed to strengthen industry guidelines for managing environmental and social risks that stem from project finance, sources familiar with the situation told Jiji Press. The agreement was reached at a meeting in Washington, which brought together the 60 signatories to the voluntary guidelines, called the Equator Principles. The institutions include Japanese mega banks Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp.

The guidelines have been criticized as being insufficient by environmental groups because they do not require signatories to disclose what specific action or system they have introduced to reduce environmental and social impacts from project finance. Participants to the Washington meeting agreed to require the institutions to make such disclosure early. Those failing to meet the requirement could be expelled.

The institutions also agreed to ask financial institutions in emerging economies such as China, India and Russia to adopt the Equator Principles. The principles, backed by International Finance Corporation, a World Bank affiliate, cover financing to projects valued at $10 million or more. …” [Jiji Press (Japan)/Factiva]

In related environmental news, Kyodo News writes that “G8 labor ministers will agree to push for environmentally friendly ways of working and to ensure harmony between labor and environmental policies when they meet in the city of Niigata from Sunday, according to a draft statement obtained by Kyodo News on Thursday. …

Measures to rectify regional inequalities and to realize a healthy work-life balance were also incorporated into the draft statement. The statement warns that advancing globalization ‘can entail disparities and adjustment difficulties in labor markets,’ urging the member states to ‘promote local development and job creation by facilitating the effective use of local resources and policies’ and calling for active participation by local governments and nonprofit organizations. …[Kyodo News (Japan)/Factiva ]

In a separate piece, Jiji News also reports that “Japan won support from 17 countries for its proposal for reducing greenhouse gas emissions through a sector-by-sector approach when they met Thursday. Government officials, researchers and business leaders from the 17 nations, including the United States and European countries, rated the Japanese proposal as effective, a Japanese Environment Ministry official said after a Japan-sponsored international workshop in Paris. …” [Jiji Press (Japan)/Factiva]

Foreign Investment In Latin America Surges Over 100 Billion USD

“With its ? natural resources markets and expanding infrastructure, foreign direct investment (FDI) in Latin America topped $100 billion $for the first time in 2007, a UN agency said Thursday.

The Economic Commission for Latin America and the Caribbean (ECLAC) said the figure, which had reached a record $89 billion in 1999, soared to a new high of $106 billion in 2007. Foreign direct investment in the region rose 46 percent from 2006 to 2007, the report added. …” [Agence France Presse/Factiva]

Dow Jones notes that “…The pace of Latin America's FDI growth led the world's economically developing regions last year, said ECLAC, in a press release. Worldwide, developing countries averaged 17 percent FDI growth in 2007, and economies in transition from central planning to free markets averaged 43 percent growth, the commission said. …

In general, the services sector was the largest recipient of FDI in the region, particularly Brazil. But natural resources captured the biggest chunk of FDI in Chile, Colombia and Ecuador, and the manufacturing sector was the main recipient of FDI in Mexico. …” [Dow Jones/Factiva]

Reuters adds that “…The increase was driven by transnational companies seeking to expand into new markets and capitalize on demand growth for both goods and services, and in search of natural resources, the commission said in an annual report. …

Brazil alone saw an increase of $15.8 billion to $34.59 billion, an increase of 84 percent from a year earlier. In Mexico it rose 21 percent from a year earlier to $23.23 billion, and FDI in Chile rose 96 percent to $14.46 billion last year. Colombia was next with an increase of 40 percent to $9.03 billion. …” [Reuters/Factiva]

Commentary: Growing Pains - Food Price Rises Will Slow Africa’s Ascent From Poverty Until Its Farmers Get A New Deal

A commentary published in Time Magazine by World Bank Managing Director Ngozi Okonjo-Iweala writes: “The global food crisis could not have come at a worse time for Africa. After 30 years of collapse and stagnation, African economies are finally growing at the same pace as the global economy—5.4 percent a year for the last three years. …

That growth reflects great promise, but it is under grave threat from the staggering rise in food prices. Families in the bottom fifth of the population in Burkina Faso and Ethiopia now spend more than half of their budget on food; even a small price increase may mean children going to bed hungry for days. The urban poor are worse hit because they can only buy food; in rural areas at least some people benefit from higher prices for the food they sell, although most poor, rural households remain net buyers of food….

Together with other development partners, the World Bank is supporting governments in protecting the poor from this severe threat to their well-being. … These quick infusions of cash do more than help poor people buy food. They also help the governments of these countries avoid rash and ultimately counterproductive policies that could undermine the economic progress of the past decade. Controls on the price of food, for example, are politically tempting when people are rioting in the streets, but they have been shown time and again to lead to even worse food shortages; they discourage farmers from planting and squeeze the poor out of the production process. Some 28 countries around the world have also reacted to food-price hikes by placing restrictions on food exports. Such measures lead to even higher world prices, greater smuggling across borders and, once again, depressed prices for domestic farmers.

At least two countries, India and Ukraine, have recently relaxed their restrictions. Others, such as South Africa, have resisted the pressure to introduce any new distortionary trade policies. While trying to cushion the impact of high food prices on the poor, African governments and their partners are also trying to make sure Africa’s long neglected farmers can benefit from the price increases. The World Bank is working with African countries and institutions to improve agricultural productivity and reverse the under investment in food production. …

If the world’s richer countries really want to help poor African farmers, they could make a massive difference by eliminating their own agricultural subsidies. Is it really acceptable that while the average African lives on $ 2.30 a day, cattle in Europe draw an average subsidy of $2.20 per head a day? Past distortions in global agricultural markets have contributed to historic under investment in Africa’s agriculture. Cheap maize, wheat and rice from global markets have displaced locally produced staples such as cassava, plantains, sweet potatoes and sorghum. Now imports are neither cheap nor readily available, and domestic production has to increase quickly to fill the gap. With a New Deal for African farmers—better advice, improved seeds, affordable fertilizer, the efficient use of water and fairer trade — Africa can more than meet the current challenges.” [Time Magazine (US)/Factiva]

Also in this Edition; Briefly Noted…

The 53 nation African Union will hold its next summit in the Egyptian resort of Sharm El-Sheikh on June 30-July 1 and increasing the supply of drinking water will be the key theme, the AU said in a statement Thursday. [Agence France Presse/Factiva]

Providing free AIDS drugs to people in northern Malawi has slashed adult mortality rates, vindicating a recent ramp-up in treatment in poor parts of rural Africa, researchers said on Friday.   Just eight months after a free clinic opened in Karonga Town in June 2005, the death rate in a rural area 80 km (50 miles) away had fallen enough to be detected at the general population level, they wrote in the Lancet medical journal. [Reuters/Factiva]

The EU has offered to provide Tanzania with a $860 million aimed at boosting economic development and fighting poverty in the country. The grant, covering the period of between 2008 and 2013, is to be channeled mainly through the General Budget Support mechanism. [Xinhua/Factiva]

Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security under a plan being considered by Beijing. A proposal drafted by the agriculture ministry would make supporting offshore land acquisition by domestic agricultural companies’ government policy. [The Financial Times (UK)]

The world's largest steelmaker, Arcelor Mittal, said on Thursday it is looking to invest up to $10 billion in Indonesia as it taps into the country's steel and mining sector. As part of its investment plans for Southeast Asia's top economy, Arcelor Mittal has proposed an iron ore and coal mining joint venture with local mining firm PT Aneka Tambang Tbk and a joint venture with state-owned steelmaker PT Krakatau Steel to develop a new steel plant in Java. [Reuters/Factiva]

Pakistan's new coalition government has ordered a massive cut in budgets across the board, including military spending, to cope with the rising cost of fuel and food subsidies, Finance Minister Ishaq Dar said Thursday. It is also seeking to raise at least $3 billion from international lenders and foreign investors to bolster its exchange reserves. [The Financial Times (UK)]

Pakistan is negotiating with the visiting mission of the World Bank (WB) for finalising a new program to get $500 million loan before June 30, 2008, in order to curb its financial difficulties owing to higher POL and commodity prices. [The News (Pakistan)]

India has extended its futures trading ban to four more food commodities despite warnings, including from the government-appointed market regulator, that such measures will do nothing to quell inflation. [The Financial Times (UK)]

The World Bank Ukraine office on Thursday called on leading grain producer Ukraine to immediately fulfill a promise to lift export quotas to help ease a global food crisis. [AFX/Factiva]

Serbia is likely to join the World Trade Organisation (WTO) in the middle of next year, as both sides push ahead with the accession negotiations, WTO and Serbian officials said on Thursday. [Reuters/Factiva]

A number of executive directors of the World Bank are to begin their official few-day visit to Yemen on Friday. Planning and International Cooperation Minister Abdul-Karim al-Arhabi said to Saba that this visit is to support and boost cooperation ties with Yemen and to get acquainted closely with Bank's projects in Yemen. [Organisation of Asia-Pacific News Agencies (Malaysia)/Factiva]

The five largest fully publicly traded oil firms are spending more on finding and producing oil, but the industry is still handing back much of its windfall from record oil prices to investors. Exxon Mobil Corp., Royal Dutch Shell Plc, BP Plc and two smaller rivals upped capital spending to $29 billion in the first quarter - and spent $20.7 billion on dividends and stock buybacks. [Reuters/Factiva]

US biodiesel companies are lobbying for World Trade Organisation legal action against their European counterparts, the latest in a proliferation of trade disputes within the biofuels industry. The move comes after last week's announcement that EU biodiesel manufacturers will ask the European Commission to impose emergency duties on US imports to combat what it describes as the effects of subsidies and unfair -pricing. [The Financial Times (UK)]

An assault on climate change on many fronts makes good economic sense but will be money badly spent if the world focuses exclusively on cutting greenhouse gas emissions, a study said on Thursday. A 100-year package costing $800 billion to help people adapt to the impacts of warming - such as droughts or rising seas - while also funding research into new technology and curbing emissions could yield benefits of $2.1 trillion, it said. [Reuters/Factiva]

Tommaso Padoa-Schioppa has resigned from the chairmanship of the International Monetary Fund's policy steering committee, the IMFC, after leaving his job as Italian economy minister, an Italian Treasury official said. [Reuters/Factiva]