[wanabidii] Annan urges Kenya to implement Constitution ahead of polls

Sunday, August 26, 2012



The People of Kenya must wake up. In Order to form a more perfect Union for Peace to take shape, Justice must take effect in order to provide for common defense and security so that general welfare of all can be promoted and guaranteed.


First, I condemn in the strongest term the hooliganism of thugs masquarading as Luos who went to attack Miguna Miguna at his peeling the mask book signing. It is unacceptable and legal action must be taken against those people. If PM Raila is excercising the power of the use of thugs to silence people, he must be answerable to the court of law. He has no right to silence people from taking about his misdoings. He must know that some of his actions have heart many people in Luo Nyanza and the Community Wealth and Resources that have been stolen by him, he must be brave enough to honor them. Instead of behaving civil and explaining himself, he is excercing thuggery which is backward and foolish. He should know that, he is adding fuel on fire and many people are beggining to demand more including those of Luo Thrift etc., yes, he will not blackmail Luos indefinately, the whole truth will spill out and he cannot force himself to be a leader with baggages of corruption and mistrusts.


Both Kibaki and Raila must own up to their responsibilities and agreements they committed to public on oath to uphold. Any acts to bring people down must be challenged forcefully otherwise we are all doomed. Both the Local legal jurisdiction and the ICC Hague must take urgent action to save Kenyans. Things are getting out of control and we cannot afford to keep quite any longer. Both Kibaki and Raila are the key reason for 2007/8 mass massacre of slaughtering innocent people in Kenya as they were the ones scrumbling for leadership. They both must be held accountable for Things Fall Apart in Kenya as they have laid down strategies to wipe out Kenyans to repeat in a worse-case-scenario of what happened in 2007/8. Their main agenda is to force people out of their land to pave way for the unscrupulouse International Corporate Special Interest investors. This is wrong and must be challenged fiercely......


People's power are the Authority over the Government. Peoples demands are the supreme authority that guides principles for constitutional Legislation. Under Democracy, People have authority to demand Transparency and Accountability for public wealth and resources that are shared by the business and Corporation for trading investment. The power of shareholding is therefore limited by Legislative regulatory Trading policies that provide balances and protects public mandate; where all must be treated fairly on common shared interest. If the Coalition Government leadership have failed to do their part responsibly and have fallen to be cheaply hired or bought by the unscrupulous Corporate Special Business Interest so they become heroes against the public, woe unto them; for they must be removed from engaging in public business undertaking. If MPs can pass tampered Integrity Bill, they have no business staying in public office.


The Government operations must guarantee people's welfare and provide security to all equally as it is a right and not a privilege. In any case, whenever any part of government establishment becomes destructive or is unable to render service as required, it is the right of the people to stand against those irregularities through legal justice at the Court of Law and in public demonstrations. It is crucial that public mandate, needs and demand must be adhered to; it is an agreement and a commitment that must be observed by those given the responsibility to be in public office.


Privileges of incorporation is granted selectively to enable activities that benefit both the business and public fairly, such as construction of roads etc., and Enabling shareholders and Stakeholders to profit fairly is seen as a means to that end. They are forbidden to attempt to influence elections, public policy and other realms of Civic Society.


Ø Corporate charters (licenses to exist) are granted for a limited time and could be revoked promptly for violating laws.


Ø Corporations were often terminated if they exceeded their authority or caused public harm.


Ø Corporations should engage only in activities necessary to fulfill their chartered purpose.


Ø Corporations should not make any political moves to influence law-making.


Ø Corporations must not own stock in other corporations nor own any public property which is not essential to fulfilling their chartered purpose.


Ø Business Owners, CEOs and managers must own responsibility for criminal acts committed on the job against employees or otherwise.


Ø Corporations could not make any political or charitable contributions nor spend money to influence law-making.


From all our struggles, what I see all over around us is sadness and betrayal which now overwhelmed my spirit. Looking around from current events of excessive corruption, graft and impunity taking toll, the truth is that, "We are not free." We must fight the hardest and confront these irregularities and wrong doings more fiercely if we must save the future for our grandchildren.


The Constitution is a symbol of our enduring freedom of speech and of association. If it has been doctored to benefit Special Interest instead of Public Interest, this is a crime against those who accepted responsibilities under oath to protect and preserve the same people's democratic principles.


The altered version meant to benefit Corporate Special Business interest against public interest must be contested as it is TREASONARY committed AGAINST THE PEOPLE. The Coalition Government Leadership therefore, has no business staying any longer in power. They must vacate public office now.


What the Coalition Government Leadership with Party members have done cannot be tolerated anymore and is unacceptable. Legal action must take effect immediately and save the people from further troubles.


Miguna Miguna taking on Raila should serve as an education awareness to the people of Kenya and is not a biased approach. Miguna like many others have a right to engage and demand for Balance, Transparency, Accountability with integrity. Without confronting injustices our struggle for Reform Change will remain hot air without any good reward. Leaders must begin to understand that it is illegal to miss-use public office powers for self-gain and greediness.


From now on, Kenyan Police must be led by the Armed Forces as they have failed and cannot be trusted to provide public security.


It is true that there is no security in Kenya. People are living under extreme fear. The Coalition Government Leadership with its party organs have failed, they must urgently dissolve and Way Forward strategy must take effect under the Transitional Caretaker Committee otherwise Kenya is no more. The Coalition Government leadership has failed to implement the constitution as is required. They have failed the threshold of integrity by far and large and have no value for integrity. They must dissolve now.........

Judy Miriga
Diaspora Spokesperson
Executive Director
Confederation Council Foundation for Africa Inc.,

Annan urges Kenya to implement Constitution ahead of polls

Former UN secretary general Kofi Annan (centre) with former Tanzanian President Benjamin Mkapa (left) and Prime Minister Raila Odinga during the third Kenya National Dialogue Review conference at the Crowne Plaza, Nairobi on December 06, 2011. Photo/JENNIFER MUIRURI

Former UN secretary general Kofi Annan (centre) with former Tanzanian President Benjamin Mkapa (left) and Prime Minister Raila Odinga during the third Kenya National Dialogue Review conference at the Crowne Plaza, Nairobi on December 06, 2011. Photo/JENNIFER MUIRURI NATION MEDIA GROUP

Posted Sunday, August 26 2012 at 11:37

In Summary

  • Kenya urged to implement key aspects of the Constitution
  • Constitution should address the issues that triggered the Post-Election Violence of 2007/8
The government has been urged to implement key aspects of the Constitution ahead of the General Election. Read (MPs beat deadline to pass key Bills)
In a statement to commemorate the second anniversary of the promulgation of the Constitution, Mr Kofi Annan, who is also the Chair of the AU Panel of Eminent African Personalities, said the oustanding issues in the Constitution relating to police reforms and gender representation should be addressed before the elections.
Some of the key factors outlined by Mr Annan include the areas of police reform, in particular the creation of the National Police Service Commission and the appointment of the Inspector-General of Police as well as the conclusion of the process to appoint commissioners to the Ethics and Anti-Corruption Commission.
"It is also critical that the issue of gender representation within the National Assembly receives the attention it deserves and is authoritatively concluded before it affects the electoral preparedness timetable. We are confident, however, that these and other outstanding tasks will be completed," he said.
Mr Annan said Kenya's greatest challenge was ensuring that the implementation of Constitution will also address the issues that triggered the Post-Election Violence of 2007/8.
"The comprehensive implementation of the Constitution is the roadmap by which the people of Kenya overwhelmingly wish to see the nation guided. They wish to see the national values and principles of governance upheld to include integrity, transparency and accountability. The need for elected and appointed State officers to be leaders of integrity, as required under Chapter 6, is critical. Ensuring democratic and accountable exercise of power, and extending powers of self-governance to the people through devolution are equally vital," he said.
He called upon key institutions mandated with managing the polls to ensure free, fair, credible and peaceful elections that will retain the confidence of the people of Kenya as they discharge their respective responsibilities.
"The next General Election is about more than just ensuring that the electoral process is transparent. The credibility of the polls will also be determined by the level of nationwide participation. The elections must be viewed by all Kenyans as a national civic responsibility and opportunity to determine their future," he said.

What's the plot against Chief Justice Mutunga?

Posted Saturday, August 25 2012 at 20:49

In Summary

  • Guillotine: Whose political ambitions will the judiciary guillotine under Chapter Six?
  • I believe the CJ is unshakable. But it's not up to him alone to defend himself or the 'revolution'
  • Every movement needs ideologues and leaders. CJ Mutunga is the unquestioned leader of the judiciary
He's not a politician. But opinion polls would confirm that he's the most popular Kenyan alive today.
He's Chief Justice Willy Mutunga, known as the father of Kenya's civil society.
In an unlikely event, he ascended to the pinnacle of the judiciary last year.
History – when it's finally written – will confirm that CJ Mutunga's "capture" of the judiciary was the key turning point in Kenya's modern history.
But for CJ Mutunga, the path from here to political immortality is a deadly minefield. That's because the lords of impunity know he's preparing their graveyard.
Take this to the bank – they'll fight back. They are big, mean and wealthy. They will fight dirty. Only the people of Kenya can save him.
Lords of impunity
Nothing has rattled the lords of impunity more than two things – the International Criminal Court and Chapter Six of the Constitution. Both stand in the way of the "old order". That's because they are the midwives of the "new order".
But CJ Mutunga is the critical link to both. The merchants of impunity had hoped to use the judiciary to stop the ICC process. But their plans were shipwrecked when Dr Mutunga became Chief Justice
Now Chapter Six is the next battleground. Whose political ambitions will the judiciary guillotine under Chapter Six? Will, for instance, Deputy Prime Minister Uhuru Kenyatta and Eldoret North MP William Ruto survive the scrutiny of Chapter Six?
Mr Kenyatta and Mr Ruto aren't the only ones facing the judicial cudgel. Spouse batterers, looters, rapists and murderers needn't apply.
We are probably talking about more than half of the senior political class. That's transformational. But it's also a titanic struggle. They won't go quietly. But go they must if Kenya is to have a new beginning.
Entire judiciary
My view is that no Kenyan is more important to this process than CJ Mutunga. It's true that he's only one man. But he can't do it alone – he needs the entire judiciary as an institution.
It's in light of this struggle we must understand the so-called National Conservative Forum. The group is as transparent as it is ignoble.
The term "conservative" is itself a dead giveaway. It refers to a political ideology that's anti-poor, anti-environment, anti-women, anti-gay, and pro-exploitation and anti-reform. Even in the West, conservatism is a rapidly dying ideology. It represents a bygone era.
Kenya's new Constitution largely repudiates conservatism. The people fronting the Conservative Forum are unhappy with the new Constitution. They want to turn back the clock.
To them, Kenya should be governed only by the Christian faith. They don't believe in secularism. They don't know that Kenya belongs to all who live in it. Nor do they believe in equality.
But the real target of the Conservative Forum is the judiciary and, more specifically, CJ Mutunga. The group's ambition has much in common with the objectives of those who have yet to fully embrace the new judiciary and its reformist programme. They would like nothing more than to slow down CJ Mutunga.
From their utterances, they appear to believe that Dr Mutunga stands in the way of their conservative mission.
They see him as the enforcer of Chapter Six. I suspect that we will be hearing more from them as preparations for the General Election heat up. They will put up court challenges.
They will argue, as we heard, that the judiciary is imposing "foreign" values and ideologies on Kenyans. But they will do so in the English language, itself a "foreign" language.
Who is behind this group? I don't have hard facts, but deductive reasoning will do. Is it mere coincidence that the public stance of some of the lawyers at the centre of the group always seems aligned to that of PNU?
Reform movement
Kenya's reform movement has been a national effort. It's true that it's had its luminaries, but it was always a mass movement. But a body without a head is no good.
Every movement needs ideologues and leaders. CJ Mutunga is the unquestioned leader of the judiciary. As he goes, so does the judiciary.
Anti-reformers know this fact. That's why they are targeting him. I believe that the CJ is unshakable. But it's not up to him alone to defend himself, or the "revolution".
That's the job of all Kenyans. That's why we must protect him and the judiciary.
Makau Mutua is Dean and SUNY Distinguished Professor at SUNY Buffalo Law School and Chair of the KHRC.

MPs pass tampered Integrity Bill

Updated Saturday, August 25 2012 at 00:00 GMT+3
By Peter Opiyo
Members of Parliament have ensured an easy return to the National Assembly for dozens of their own suspected of involvement in crimes.
Under the cover of darkness, the MPs worked to ensure voters would not learn anything about suspected criminals that would keep them out of public office.
This makes it easier for lawbreakers to attain public office at a time when there is rising concern some Kenyan institutions are unduly influenced by foreign despots and drug lords.
The MPs tore out sections of the Leadership and Integrity Bill intended to ensure those elected to public office are people of high morals. They sat until five minutes past midnight on Thursday to vote against requirements on wealth declaration, vetting by State agencies and publication of their pending criminal court cases.
The move flies in the face of public pressure to strengthen the Bill. Those seeking elective positions (presidential, parliamentary and county assembly posts) will not be vetted by State agencies. Those with pending criminal court cases would have a free ride to the ballot. The electorate will also be in the dark about pending criminal court cases against aspirants. The changes make a mockery of the era of transparency envisaged under the new Constitution, civil society groups say.
The vetting component was considered a huge step in clearing the chaff from the country's leadership and was incorporated in the version of the Bill that the Commission for the Implementation of the Constitution forwarded to the Attorney General, but the Cabinet expunged this provision from the Bill.
Though Kisumu Town East MP Shakeel Shabbir had expressed the intention to reintroduce it, he withdrew it from the list of amendments after his colleagues had voted against a provision on wealth declaration that could have laid the ground for vetting. The initial Bill, crafted by Charles Nyachae-led CIC, put in stringent vetting mechanisms.
It had provisions that required those seeking public office to be cleared by the relevant State agencies. This would see them get approval or clearance from the National Security Intelligence Service, Kenya Revenue Authority, Higher Education Loans Board, and the National Police Service, or any other public entity.
Wealth declaration
This is what Shabbir had intended to move, but withdrew after the section on wealth declaration was defeated at the vote.
The Constitutional Implementation Oversight Committee and the Parliamentary Committee on Justice and Legal Affairs, in their meeting on Tuesday, had argued that the reinstatement was "incompatible" with Article 99 (3) of the Constitution.
On Thursday night, Chairman of the Justice and Legal Affairs Committee Njoroge Baiya, on behalf of the Committee, brought an amendment seeking to have State Officers declare their wealth and file the same report with the Ethics and Anti-Corruption Commission, before they are elected or appointed to office.
This provision required State Officers to also declare their wealth within the first 30 days of being appointed or elected into office, on an annual basis and within 30 days of ceasing to be a State Officer. It slapped a one-year jail term and a fine of Sh5 million against those who fail to declare wealth.
But the MPs voted against this provision, save for Baiya, Shabbir, Martha Karua (Gichugu), and nominated MPs Millie Odhiambo, and Rachael Shebesh, who supported the amendment.
Shabbir would later introduce a similar amendment, but this again was shot down. In supporting the wealth declaration Karua said: "Let's make wealth declaration public so that we can catch everyone who is milking a cow that is not his."
Those opposed to wealth declaration argued it would expose them to the public and more so to gangsters.
"Access to wealth declaration shall give gangsters ammunition for kidnap. They will know how much you own and they will come for you," said Yatta MP, Charles Kilonzo.
"One qualification of getting into leadership is because you are solvent. Insolvent people can't be in leadership," said Mathira MP, Ephraim Maina. Finance Minister Njeru Githae, in opposing the amendment, said it would give opponents a weapon to campaign against them.
Contentious clause
"Your opponents will look at your wealth and see you have nothing much and will ask what kind of a person is this we are electing?" said Githae. Another amendment by the Legal Affairs Committee requiring State Officers not to participate in a tender for the supply of goods and services to a public entity proved contentious and occasioned a division.
It carried the day with 75 MPs voting for it, while ten opposed it. Only Public Works Assistant Minister Mwangi Kiunjuri abstained. The vote was the first to be done electronically after the refurbishment of the new Chamber. It took only three minutes for all the 86 MPs in attendance to vote. In giving the people free ride to the ballot without the public knowing of pending court cases against them, the MPs robbed the public of their right to know the kind of leaders they intend to put in public office.
The amendment introduced by Githunguri MP, Njoroge Baiya, on behalf of the Legal Affairs Committee, required the Ethics and Anti-Corruption Commission to publish and publicise a list of persons to be elected and who have criminal cases pending in court. The amendment was meant to supply the public with adequate knowledge of those they intend to elect so that they can make informed decisions.
But the MPs argued making such cases public would portend a death knell for their quest to seek public positions, as publishing such cases would portray them as guilty.
Some said it could provide fodder for malicious people to taint others' names thereby jeopardising their chances of being elected.
"When this amendment is passed anybody can go to court maliciously and when the list is published it can be used against you," said Mr Kiunjuri.
August 24, 2012 at 2:22 pm

Kenya Red Cross: 200 people dead in pre-election chaos

Nairobi, Kenya — More than 200 people have died since January in several separate clashes that follow the pattern of pre-election violence that Kenya has experienced in most elections since the early 1990s, the head of the Kenya Red Cross said Friday.
This week's attack by a farming community, which killed more than 52 people of a cattle herding tribe, falls into that pattern, Kenya Red Cross Secretary General Abbas Gullet said.
In addition to the dead, the Kenya Red Cross said that at least 50 people are missing from the attack by Pokomo tribe farmers on the Orma people, who are largely semi-nomadic livestock herders.
Gullet also attributed the killing of 12 people in fighting between the two tribes in Kenya's north this week to pre-election violence.
Violence occurred before voting in three out of four of Kenya's elections since 1992, Gullet said. The exception was the December 2007 polls, when deadly clashes erupted after voting. That violence was set off by a dispute over who won the presidential contest.
What started as street protests over the presidential results, which international observers said was flawed, soon degenerated into tribe versus tribe violence, in which tribes that had rallied behind an opposition movement targeted members of President Kibaki's Kikuyu community and tribes that had supported him.
More than 1,000 people died and 600,000 people were displaced from their homes in the wave of violence which lasted for two months.
The fighting ended when former U.N. Secretary General Kofi Annan brokered a peace deal in which opposition challenger Raila Odinga became Prime Minister in a coalition government, while President Mwai Kibaki retained his post.
As the next year's general election approaches political tensions have increased due to competitions among potential candidates for the presidency, exacerbating tribal animosity.
Polls put Prime Minister Odinga above the rest of the presidential hopefuls. Two other possible presidential challengers face crimes against humanity charges at International Criminal Court for allegedly orchestrating 2007-2008 violence.
Gullet says if the rate of the current killings continues the deaths will overshadow those in 2007-2008 post-election violence.
"Learning from that experience we are bound to have pre-election violence in this country. ... This year it looks like it is going to be worse than the past because the area involved is far bigger," he said.
People in Kenya's north and southeast, where the recent violence has been occurring, have easy access to guns, Gullet said. The regions are close to porous borders with neighboring countries that are either war-torn or are emerging from conflict.
He said political competition for positions in the newly restructured seats in the legislature and administrative posts, which were created in a new constitution that Kenya adopted in 2010, is causing the violence.
Another cause of the violence is that communities are disputing boundaries between counties and constituencies, divisions that were formed by the new constitution, he said.
"As we continue for the next six to seven months before the election it is clear that this pattern will continue unless something is done drastically, now and not tomorrow," he said.
A deputy minister is being investigated over his alleged involvement in the killing of the 52 people.
Acting Internal Security Minister Yusuf Haji directed the Criminal Investigations Department Thursday to probe Livestock Development Assistant Minister Dhadho Godhana over possible complicity in the killings.
Kenya's government has also announced that it will conduct a countrywide operation to disarm all communities with illegal weapons after the massacre of 52 people earlier this week when hundreds of farmers attacked cattle herders.
Witnesses said some Pokomo were armed with guns and shot the Orma. Other Orma people were burned to death in their houses, while others were hacked to death or shot with arrows, and their livestock stolen in the dawn attack on Wednesday.
The attack was retaliation for the killing of two Pokomo farmers last week, said officials. The conflict started with accusations that the Orma graze their livestock on Pokomo farms.
The Tana River area is about 430 miles from the capital. Kakai says at least 700 people were displaced from their homes by the attack and urgently need aid.
Experts argue that the utilization of the waters of the Tana River has been in the middle of a conflict pitting the Pokomo against the Orma.
According to research by the Institute of Security Studies in 2004, following clashes in the Tana River area in 2000 to 2002, the Pokomo claim the land along the river and the Orma claim the waters of the river.
The research by Taya Weiss titled "Guns in the Borderlands Reducing the Demand for Small Arms." At least 108 people died in the 2000-2002 clashes, according to the parliamentary record.
The longstanding conflict between the two tribes had previously resulted in relatively low casualties but the increased availability of guns has caused the casualties to escalate and more property to be destroyed, said the report.

In whose interest are MPs 'choking' new Laws?

Updated Wednesday, August 15 2012 at 00:00 GMT+3
We invoke the national interest to wade once again into the small, but critical matter of integrity. And we used up quite some space quoting verbatim the Preamble to the Judicial Service Code of Conduct and Ethics, based on Section 5 (1) of the Public Officer Ethics Act No. 4 of 2003 in the new Constitution.
It enumerates what is expected of judicial service officers in official and private capacity in order to maintain the dignity and integrity of the office. In fact the bar of integrity was set so high and the Ethics and Anti-Corruption Commission envisaged as the custodian. First among equals, as it were, for not even that commission was granted absolute powers.
That, however, proved a pipe dream and had a very short shelf life. No sooner had the words "radical surgery" been uttered than the Lords of Impunity sharpened their claws, burnt the midnight oil, put several lawyers on a tight leash and on Speed-Dial as they anticipated the scalpel of the then Kenya Anti-Corruption Commission. But the commission was fought and challenged every inch of the way!
Boxed from every imaginable corner, the commission limped away from the choppy seas as a furious corruption fought back. Those who were on its board must be sitting in retirement somewhere wondering whether it was all worth sticking out their necks for flag and country.
If the Commission for Implementation of the Constitution (CIC), Transparency International-Kenya, Fida-Kenya and Community Aid International are to be believed, the Tenth Parliament easily fits the cloak of Enemy of the People of Kenya.
That the MPs have systematically emasculated the Executive to the point it appears a lame duck on virtually every pronouncement, appointment or debate, is not in doubt. Indeed, the presidency, come April 2013, shall be a hollow shell that will feature a figurehead without much "real power" as we have known it.
The MPs stand accused of undermining the Constitution promulgated in 2010 by having clobbered the teeth to bite officers intent on exercising impunity, fleecing the public purse or otherwise dragging an entire nation 20 years back into a dark past that is best forgotten.
The Leadership and Integrity Bill that encompasses the Public Officer Ethics and Integrity Act that is meant to ensure the triumph of meritocracy and best practice has been shredded to allow legroom for mediocrity, incompetence and malpractice.
Amendments scurried through the most recent Miscellaneous Bill are undoubtedly meant to shield unqualified members find their way back to public office or carpet the way for a soft landing in 2013. The three non-governmental organisations and CIC have demanded that Parliament reinstate deleted clauses originally proposed by the CIC so that legislation is watertight and is a level playing field for all-comers.
"By deleting these provisions, Cabinet lowered standards of leadership contrary to public expectations and in contravention of the letter and spirit of the Constitution," their statement opines.
The CIC has threatened to seek a constitutional interpretation of what was intended, while Transparency International-Kenya, Fida-Kenya and Community Aid International urge Kenyans to resist any attempt to undermine the Constitution. If anything, that is a noble call to civil disobedience or "People Power" since even a cursory reading of Chapter Six is clearly a statement of intent to ensure selection and election of leaders based on personal integrity, competence and suitability. What is to stop the legislators from taking the fight to Kenya Revenue Authority to ensure they clip its teeth since the taxpayer shall no longer shoulder their excesses and runaway conspicuous consumption?
"The CIC proposal provided a mechanism to fulfill this provision. It required the Ethics and Anti-Corruption Commission to issue a certificate of compliance to any person to gauge their compliance with Chapter Six of the Constitution before they are elected for office," the statement further added.
Since they have "dealt with" the Executive and paralysed the Ethics and Anti-Corruption Commission, as sure as day follows night and night follows day, the next victim to be sacrificed on the legislative altar is KRA and the National Cohesion and Integration Commission. Reason? The NCIC and the taxman have been mumbling to the effect that they have "several files" ready for investigation!
Rocket science? No!
The same thing happened when the PLO Lumumba-led Integrity Centre spoke of "volatile files" in its possession seeking forensic investigation and court action. It was promptly disgraced and disbanded.
Are public fears far-fetched? Perhaps, but it would be nice to see which snake oil salesman can stand up to the challenge our prognosis of an out-of-control parliament wrong.

MPs to pass key Bills in 3 days as deadline looms

Updated Tuesday, August 21 2012 at 00:00 GMT+3
CIC Chairman Charles Nyachae has said his team would go to court if law on integrity is watered down.
By Martin Mutua
MPs this week juggle their selfish interests that have seen them water down key integrity and vetting related rules and unrelenting pressure from the public to change course.
Accused of removing hurdles such as vetting which were meant to raise the levels of competence, suitability and uprightness among leaders, Members of Parliament are left with only three days to enact into law six Bills. In every of their step the public will be watching to see which side the MPs will take.
The MPs have only up to the weekend to enact the pending Bills, which include those on national security and war against terrorism, which they have to go through with a fine toothcomb to ensure the changes proposed do not assault the country's range of freedoms ensconced in the current Constitution under its robust Bill of Rights.
The Bills must be passed and assented to by the President before Monday next week, which might see the House extend its sittings up to the weekend in order to beat the deadline in accordance with the law.
The security Bills include The National Intelligence Security Bill, The National Security Council Bill and Kenya Defence Forces Bill. Others are The Leadership and Integrity Bill, The Assumption of Office of the President Bill and The Petitions to Parliament Bill.
MPs are being accused by civil society groups of having watered down the Leadership and Integrity Bill, which had among other things empowered the Ethics and Anti-Corruption Commission to issue compliance or clearance certificates to candidates.
The original Bill according to the groups that also include the Commission on the implementation of the Constitution mandated other bodies like Kenya Revenue Authority and the Higher Education Loans Board to declare if candidates were up to date on tax payments and university fees loan repayment.
In place of the proposed stringent vetting process, MPs are said to have allowed for candidates only to fill a self-gauging form in which they will be only required to tick 'Yes' or 'No' against questions themselves.
Double standards
Civil society and other pressure groups are incensed the thresholds the members set for and subjected nominees for other high public service positions won't apply to them as they seek clearance to run for elective posts next year.
Committee for the Implementation of the Constitution led by Mr Charles Nyachae has already threatened to go to court if the Bill will be passed by the House in its "watered down" state.
At the same time the Parliamentary oversight Committee on the Implementation of the Constitution (CIOC) has organised a half-day workshop for all MPs this morning to chart the way forward.
CIOC Chairman Mr Abdikadir Mohammed told The Standard in an interview the workshop would be to brief members on the progress of the Bills.
"It is, however, disgusting to note that for a Bill to be properly handled it requires a minimum of eight weeks and now we are being called upon to enact six of them in three days, how ridiculous?" he exclaimed.
Abdikadir explained that regarding outrage over the Leadership and Integrity Bill, the committee would be looking at the proposed legislation afresh with a view to incorporating the complaints and proposals from the public.
"There has been this perception that the Integrity Bill had been watered down. We shall look at it together with all the proposed amendments that we have received from the public and civil society groups to find a compromise (position)," he added.
Mr Abdikadir explained that the workshop for members was aimed also ensuring the Bills remain aligned to the Constitution to avoid the risk of them being declared unconstitutional by the courts.
"It is a wrong perception that it is Parliament that delayed these Bills yet the blame needs to be placed on the Executive which caused the mess," he added.
Abdikadir argued MPs had been wrongly bashed on the matter whereas it was the executive that had dragged its feet.
The CIOC chairman expressed hope the delay in bringing the Bills to the House was not a deliberate move by the Executive to have Parliament "rubber stamp" the legislation they way it wanted.
"It is unfair to the House to expect members to do a better job in three days for six Bills unless it is a deliberate plan by the Executive to have the Bills rubber stamped by Parliament," he added.
Government co-Chief Whip (ODM) Jakoyo Midiwo said the three days were not sufficient for Parliament pass the six Bills and said the House might be forced to sit up to and including the weekend to clear them. "We require at least one day for each of the Bills to debate and then pass them in the Second Reading. The time is not sufficient and we might be forced to sit up to the weekend," he added.
"There are people in the Executive who are not interested in proper implementation of the Constitution and these anti-reformists are now running scared," Midiwo claimed.
Midiwo explained that Parliament was equally embroiled in another mess, as it has to also pass nominees to the National Land Commission by the close of business today in line with the set deadlines.
He argued there had been a wrong perception created within the public that Chapter Six of the Constitution couldn't function without the legislation that is before Parliament. "Chapter six of the Constitution is as good as established under the Constitution which is supreme and I don't think we need anything else for it to be enforced," he added.
Wrong perception
He said the perception also created was that there was need for certain vetting bodies to be included in the Leadership and Integrity Bill.
"This is not true, the vetting clauses are not being created and put in the Bill in order to stall the whole process because the Constitution already has those checks and balances,'' he went on.
Mr Midiwo argued, for instance, that anybody that who has not paid his or her taxes does not require the Leadership and Integrity Bill to bar them from running as that was a criminal matter which one needs to be taken to court by law enforcers.
The acting chairman of the Justice and legal Affairs committee Njoroge Baiya said the Executive was again to blame for having delayed the Bills.
"As you can see the Executive has resorted to its old habits of bringing the Bills at the last minute but the die is now cast and there is nothing we can do except to deal with those challenges,' he added.
Mr Baiya said his committee was mandated to deal with Leadership and Integrity Bill as well as the Petitions to Parliament Bill, adding that his team would have loved to have more time to scrutinise the Bills.
"Passage of the Bills will depend on whether we agree during our meeting this morning and be able to come up with a consensus otherwise we are in a crisis," he conceded.

Kenya's Revenue body cautions MPs against mutilating VAT Bill

Updated Wednesday, August 15 2012 at 11:54 GMT+3
The Kenya Revenue Authority (KRA) has defended the VAT Bill 2012, saying its passing is key to economic growth.
Last month, Finance Minister Robinson Githae tabled the Bill in Parliament, which among other things, seeks to transform most zero-rated agricultural and food items to standard rated by attracting a VAT of 16 per cent.
If passed into law, the Bill would affect several items including fertilisers, livestock feeds, insecticides and pesticides, bread, maize, wheat, milk, cream, seeds, water pumps, and gin cotton.
MPs fury
The Bill has elicited furious debate with a cross-section of Kenyans including MPs, farmers and lobby groups terming the move ill advised and a direct threat to food security. MPs have since called on Treasury to shelve the provisions that are likely to set off increase in commodity prices.
But speaking yesterday in Nairobi at a workshop on VAT Bill 2012, KRA Commissioner-General John Njiraini said the Bill is core to reforms needed to grow the economy in line with Vision 2030 economic blueprint. "Kenyans must be willing to make short-term sacrifices for long term benefits by abolishing VAT exemption, zero rating and granting remissions that are benefiting even the rich who do not deserve," Njiraini told a workshop organised by Institute of Certified Public Accountants of Kenya.
"Instead of using tax incentives to cushion the poor from the high cost of living, the Government should introduce subsidies targeting specifically the deserving," he said.
Njiraini cautioned MPs against mutilating the Bill to allow the taxman expand the tax bracket and capture more people including the poor.
"It is our position that exemptions should be limited and should expire within a specific timeframe," Njiraini said, adding that imposing tax on consumption would rope in more Kenyans from the informal sector as KRA seeks to broaden its tax base.
"Any move meant to broaden the tax base is in the long term good of society because then everyone pays to finance public service based on their means," he said. While conceding that VAT on commodities and farm inputs would increase the cost of living, he called on Government to instead introduce subsidies for the poor.
"For instance, the government should introduce a textbooks subsidy programme for public schools instead of zero rating and benefiting even the rich. The same can been done for fertiliser and other goods," Njiraini said.
Njiraini said the intentions of the VAT Bill 2012, which has since been temporarily shelved, is to simplify the VAT administration and address the perennial problem of refunds.
VAT contribution to total tax revenues steadily climbed in the 1990s and peaked at 30 per cent between 2000 and 2003. It has since declined to 27 per cent in the 2011/2012 financial year.
PM 'led meeting to
alter' Integrity bill
Friday, 17 August 2012 00:03 BY FRANCIS MUREITHI

Minister for Justice,National Cohesion and Constitutional affairs Eugene Wamalwa at a press conference July 11. Photo/File

Justice minister Eugene Wamalwa yesterday told Parliament that the Prime Minister chaired a cabinet sub-committee which made the changes in the Leadership and Integrity Bill. Wamalwa denied claims by the Commission for Implementation of Constitution and civil society groups that the changes were made to render the bill ineffective.
He asked MPs to support the bill in its present form. He said some members of the CIC among them chairman Charles Nyachae were present. CIC and Kenya Law Reforms attend the meetings of the cabinet subcommittee on implementation of the constitution as technical advisors.
"The changes were done by consensus by all those who were present including CIC," said Wamalwa. Transport minister Amos Kimunya, seconded the motion and said the original bill contained "impractical provisions." He said "the civil society is getting it all wrong," and that voters should be the one to vet candidates during campaigns.
He said aspirants should not be knocked off on technical grounds "such as certificates of good conduct". The Bill had proposed that all political aspirants or those seeking appointment first declare their income and liabilities to the Ethics and Anti-Corruption Commission to ensure only those who complied with Chapter Six of the constitution would vie.
Also deleted is a clause that would have required such aspirants for elective or state offices first secure a certificate from the EACC indicating they had complied with Chapter Six of the constitution. Wamalwa said more than 200,000 aspirants are expected to vie and it will be impossible to vet them all. Debate on the bill was however scuttled due to lack of quorum and will resume next Tuesday.
--- On Mon, 8/20/12, Andrew Keros <ackeros2001@yahoo.com> wrote:
From: Andrew Keros <ackeros2001@yahoo.com>
To: "Mwanyagetinge@yahoogroups.com" <mwanyagetinge@yahoogroups.com>, "kenya-diaspora@yahoogroups.com" <kenya-diaspora@yahoogroups.com>, "uchunguzionline@yahoogroups.com" <uchunguzionline@yahoogroups.com>, "progressive-kenyans@googlegroups.com" <progressive-kenyans@googlegroups.com>, "africa-oped@yahoogroups.com" <africa-oped@yahoogroups.com>, "NewVisionKenya@yahoogroups.com" <NewVisionKenya@yahoogroups.com>, "NVK- Mageuzi@yahoogroups.com" <nvk-mageuzi@yahoogroups.com>
Date: Monday, August 20, 2012, 6:49 PM

Hi, Sarah Elderkin,
Thank you for taking time to talk about the Kisumu Molasses Factory which has been a subject of public debate. Although you have taken enormous amount of time to evoke emotions on a matter I recently raised that has been a puzzle and still remains so as to what happened to the funds the public raised toward this project. Nevertheless, I have however, read through your write-up and I now understand something about the ownership of the factory.
The interesting thing however, is that you have down played the role the Luo community played in the acquisition of the Molasses Factory. The prominence of Raila and Spectre International here is puzzling to say the least. That time, it was the appeal to the Luo community to come together and acquire the factory. Seriously, from what you have written here, it was Raila who single handed and his lawyer later, handled the negotiations. My question is, who represented the community? And why have you not discussed about the role of the community in this whole issue until somewhere at the point of talking about shareholding? You have talked about taxes paid to the treasury and no mention of dividends to the community, if any. In case of dividends, who benefits from such acruals? Can we be told how the 5% shareholding of the Kisumu Development Trust was arrived at? Are we wrong to say that the community was capable of obtaining a loan, after raising some deposit for the bank and the assets of the factory as colatral security to buy the factory, but was short changed by Spectre International by extension the Hon. PM? Why is this Molasses issue been a subject of public debate?
It would appear the community collectively provided the security for the purchase of this factory and yet no mention of it. When business started thriving, the community was relegated. Can we be told when the community was allocated the 5% of shares? and what was the criteria? Can we know from the registrar of companies? From 1996 when Raila bid at the auction for Ksh.570m.to 1999 the second bidding by Spectre Int. of Ksh.120m., no mention of the role of the community anywhere. Would this be an oversight? Or a well designed scheme to hoodwink the citizens? Unless you come out clear, Mr. PM, this issue of Molasses factory is not going away soon.Tell those who contributed to the purchase of this factory as shareholders the truth. The truth will set you free.
You have deliberately avoided to tell us the contract between Spectre Int. and the Luo community in the purchase of this factory. How they were enjoined with Spectre Int. and how the community became the minority, since the appeal was to them to buy the said factory. Nowhere in public Spectre was ever mentioned. This clearly tells us that the public was completely given a black out and did not know what was happening all through and up to date it is a mystery to them. The only thing the public or the Luo community is aware of is that they gave money to buy shares which they have never realized. The answer is needed here!!!
For now the war against corruption continues!!! Every individual must pass Integrity vetting before he or she is allowed to run for leadership in Kenya.
Andrew Kerosi

----Forwarded Message----
From: tomoreje@gmail.com
To: progressive-kenyans@googlegroups.com, Wanakenya@googlegroups.com, uchunguzionline@yahoogroups.com, kenyaonline@yahoogroups.com, vuguvugumashinani@yahoogroups.com, Youngprofessionals_ke@googlegroups.com, africa-oped@yahoogroups.com, mwanyagetinge@yahoogroups.com
Sent: Sun, Aug 19, 2012 7:16 AM CDT

This is how i remember the events, lets debate objectively........

Read on.........


On February 16, 1990, the body of Foreign Affairs minister Dr Robert Ouko – who had been missing for four days following a trip with then President Daniel arap Moi to the USA – was found, mutilated and burnt, in a thicket near Got Alila Hill, four kilometres from his Koru home, in Nyanza.

Ouko's death was announced to the nation by Moi, who expressed his "profound sorrow". A couple of days earlier, Moi had also announced his "sadness and grave concern" at his minister's unexplained disappearance. He said he had directed that the state machinery be deployed to trace Ouko's whereabouts, and that his "top personnel" were applying "maximum effort" towards this end. It was too late. As he spoke, Ouko was already lying murdered.

Seven months later, on October 1, 1990, Moi appointed a commission of inquiry into Ouko's death. This went on very well for months – until the day Scotland Yard detective John Troon, who was investigating the case, named Nicholas Biwott, then MP for Kerio South, as one of his two main suspects. Biwott, at the time, enjoyed a status in the inner circle around Moi that had long rendered him immune from criticism, despite the fact that he was widely disliked and feared.

Moi acted swiftly to close down the commission of inquiry before any evidence against Biwott could be heard. Biwott's problems had begun when a witness, director of medical services Prof Joseph Oliech, told the commissioners that the Scotland Yard detectives had asked him whether Ouko had made any enemies because of the stalled molasses plant in Kisumu.

The molasses plant, then properly called the Kenya Chemical & Food Corporation Ltd, had been inaugurated in 1977 and abandoned five years later, one of the costliest failures in Kenya's industrial history. The original proposal for the plant's establishment had come from Nitin Madhvani, of the influential Madhvani family, investors in Kenya, Uganda and elsewhere, particularly in the sugar industry, of which molasses is a by-product.

It was to be a joint venture with the government to produce power alcohol. Despite the fact that the Madhvani group had been involved in a previous joint venture with the government that had failed to get off the ground (the Kenya Fibre Corporation, based in Nanyuki) and had cost the Treasury huge sums, the new company was set up and capitalised at Sh170 million, of which the government, as 51 per cent majority shareholder, contributed Sh86.7 million. In 1977, this was a huge sum of money.

The project was initially dealt with by three ministries – the Ministry of Finance under Mwai Kibaki and later under Prof George Saitoti, the Ministry for Commerce and Industry under Eliud Mwamunga, and the Ministry of Foreign Affairs under Dr Munyua Waiyaki. The plant's main planned function was to produce power alcohol, that is, an energy fuel, out of waste from the sugar production process.

The Ministry of Energy, under which the project eventually fell, was created by Moi in 1979, and Biwott was given the portfolio in 1983. By 1981, the government had guaranteed Sh600 million in loans for the failing molasses project and was being asked to guarantee another US$24 million. Lenders were pressing for repayment and contractors and suppliers had stopped work for lack of funds.

In 1982, government estimates showed the country would lose Sh135 million a year for the next 10 years if the project went ahead. At that point, the plant was all but abandoned, and in 1983 it was placed in receivership. Some people, however, including Ouko, minister for Industry at the time, believed the project was still viable, and Ouko had appealed to the government and been instructed to find investors for the project. He had subsequently brought investors from Italy to see the plant and they had said it was possible to revive it.

But a row over the molasses plant had been simmering for some time. Avon Ltd managing director Eric Onyango, giving evidence to the Ouko Commission, said Ouko had told him there were those among his Cabinet colleagues who favoured a different set of investors who would pay them "kickbacks". Competition had become intense.

Ouko himself had told other friends who later gave evidence that there were powerful forces in the Cabinet opposed to his determination to expose corruption. Onyango said Ouko had told him that the level of corruption in the Cabinet was "not only alarming but unbelievable". Another witness said he would reveal the names of Ouko's enemies if he were granted police protection. Biwott, informed, under the inquiry's rules, of possible adverse mention of himself, brought in a team of three lawyers.

Moi was quick to see that big trouble might be brewing and he promptly announced a new commission of inquiry – into the molasses plant. Attorney General Amos Wako was on hand as usual to deny that there was anything remarkable in this timing, and to say that the two commissions would operate independently.

Soon afterwards, the witness who had asked for police protection, James K'Oyoo, who had been a political aide to Ouko, was recalled to the stand. Deputy public prosecutor Bernard Chunga applied for K'Oyoo's evidence to be given in secret, describing it as "possibly alarming", but the witness responded that he would not ask for protection as long as his testimony could be given in public. When he took the stand, K'Oyoo said Ouko had mentioned threats to his life over the molasses plant.

A report in the New York Times, meanwhile, said the newspaper had obtained a copy of a US High Court injunction blocking Citibank New York from recovering dollar funds equal to Sh400 million in loans to Biwott's companies. Sh320 million of this was reported as secured by letters of credit in a Swiss bank account owned by Biwott.

The New York Times quoted New York officials who warned that high levels of corruption in Kenya could endanger future US aid. A letter from the head of BAK, the Italian group favoured by Ouko regarding the revival of the molasses plant, to a legal firm in Nairobi said Kenya's reputation in international business circles had been marred by corruption, and it cited Turkwel Gorge and Noolturesh (Kajiado-Machakos) water projects.

Chillingly, a memorandum from the same group of companies indicated that, in the days immediately before he died, Ouko had been preparing a report on the high-level corruption that was hindering the revival of the molasses plant. The writer of the memorandum said, "I spoke with him last on Saturday, February 10, when … he told me he was staying in Kisumu to finish his report for HE [President Moi]…."

Three days after this conversation about the report Ouko was preparing, Ouko was dead. When Detective John Troon finally took the stand, he told the commissioners he had repeatedly tried to interview Biwott, without success, and also that he had been stopped from proceeding with his investigations, particularly regarding the questioning of senior government officials.

Meanwhile, the International Monetary Fund's quarterly report stated that half the funds deposited in foreign bank accounts owned by Kenyans had been deposited in the past five years alone. On November 18, 1991, Troon named Biwott as one of two principal suspects in Ouko's murder and recommended full investigation of the corruption allegations against him. Troon said he was certain Ouko had been murdered because of his anti-corruption stance.

The following day, Moi relieved Biwott of his ministerial post "with immediate effect", then abruptly disbanded the Ouko Commission of inquiry, instead directing the Kenya Police Commissioner to "proceed with due diligence and speed" in investigating Ouko's death. Sceptics abounded, especially as the commissioners themselves had requested an adjournment because of harassment by the Special Branch, including a brutal arrest of Ouko family lawyer George Oraro, "clearly calculated to undermine the continuance of these proceedings", they said.

Moi's action was also interesting from another point of view: it came days before Kenya was to meet its increasingly reluctant donors in Paris. The issue of the billions stashed away abroad by corrupt political leaders was expected to feature prominently on the agenda, including the hundreds of millions of shillings held by Biwott in Swiss bank accounts.

With Ouko's death, the whole matter of the Kisumu molasses plant was abandoned, and the physical structure of the plant fell into disrepair – a rusting skeleton standing at the edge of the Kisumu-Busia road, a colossal monument to government mismanagement and wasted public funds.

It was apparently not until five years later that it was deemed safe to raise once again the issue of the molasses plant – and "all moveable assets" of the plant were advertised for sale on July 10, 1995. Raila Odinga, like Ouko, believed the plant had a future, and he protested officially at the intention to dispose of the assets of the company piecemeal.

The sale did not proceed, but on March 8 of the following year, 1996, an advertisement again appeared in the Daily Nation newspaper, this time offering "For sale by public auction: All assets of Kisumu Molasses Factory". The auction was to be conducted at the plant on April 15, 1996.

Among the conditions of sale was "(b) "IMPORTANT: First consideration will be taken for offer to purchase the whole plant in total [writer's emphasis]. Thereafter consideration for purchase of large combination of units and finally consideration of single item purchases." The would-be purchaser of the "whole plant or large items" was required to pay 25 per cent of the purchase price by banker's cheque at the fall of the hammer, and the balance within 30 days.

The auction did not actually take place until June 3, on which day, Mr Odinga was present. Representing Spectre International Ltd, he bid Sh570 million for the "whole plant". This turned out to be the highest bid and it was accepted by the auctioneers on behalf of the receiver and the plant's debenture holders, Kenya Commerical Bank – but only tentatively.A token deposit was therefore paid, in two cheques totalling Sh2million, with the balance of the 25 per cent to be paid upon official acceptance of the bid by the receiver and debenture holders.

M N Kanyi, of auctioneers Panama Rovers, wrote to Mr Odinga the following day and again two days later, on June 6, 1996, confirming that the bid had been accepted. Kanyi returned the two cheques lodged and requested payment of the full 25 per cent, which amounted to Sh142,500,00, not later than June 14, with the balance to be paid by July 15, 1996.

The letter of June 6 included, however, a major caveat. While the advertised lot had described "the whole plant in total", Kanyi now stated in his opening paragraph that the Sh570 million purchase price "covers all the assets of the company, which, as stressed prior to the auction, exclude land".

The Daily Nation advertisement had made no mention of this and Spectre's board was taken aback by Kanyi's remarks. It was difficult to see how a factory could be purchased sitting on thin air and it had naturally been assumed that the 240 acres of land on which the factory stood was part of the "whole plant in total" advertised for sale.

Spectre instructed its lawyers, Lumumba & Ojwang, to write to the auctioneers, which they did on June 7, pointing out that it was clear from correspondence and a previous High Court case (no. 2433 of 1995) relating to the plant that both seller and buyer understood the land to be an integral part of the offer, and that the subsequent exclusion of the land constituted a "drastic turn of events". Said Lumumba & Ojwang, "Our clients have no intention of relocating the plant elsewhere," and they were therefore seeking confirmation that the auction sale included the land .

Panama Rovers replied, saying that the Daily Nation advertisement had advised potential purchasers that it was their obligation to "ascertain the state of the assets". While this would appear to refer to the condition of the assets, and not to be a new meaning for the words "whole plant in total" (a double emphasis of the entirety of the goods), Panama asserted that the joint receiver JK Muiruri, of Bellhouse Mwangi Ernst & Young, and the auctioneer had explained before the auction that the lot included plant and machinery but not land.

The receiver also wrote to Spectre, emphasising that the land was not part of the sale. On June 13, 1996, Mr Odinga wrote to the receiver saying that discussions about the land had been initiated with the government and "the matter is in the process of being resolved". He asked for an extension of the time within which to pay the deposit.

In a congruent letter to Panama from Lumumba & Ojwang, the lawyers noted that Spectre had been given the impression that the land was part of the package. Indeed, a change in the wording of the sale notice from the "all moveable assets" advertised on July 10, 1995, to "all assets of Kisumu Molasses Factory" and the "whole plant in total" on March 8, 1996, was significant and supported this impression, said Lumumba & Ojwang, who again asked for confirmation of the inclusion of the land.

The receiver replied to Mr Odinga the following day, June 14, 1996, granting the extension of the time within which the deposit had to be paid, with the price in full to be paid by December 16 that year. Panama replied to Lumumba & Ojwang confirming that the land was not part of the sale and advising that they would enter into no further correspondence on this issue.

The situation was apparently deadlocked, and Spectre, apparently in disbelief, wrote once more to the receiver, on July 27, for reconfirmation of the land issue, which was subsequently received in a letter from the receiver of July 29, 1996. The receiver expected the shs.142,500,000 deposit on September 16, 1996. Instead, on that date, Spectre International filed suit against the receiver, stating neglect to confirm prior to the sale that the land was not included, and seeking (a) a declaration that the sale of "all assets" included the land, (b) an injunction restraining the receiver from disposing of any of the assets of the factory and (c) costs.

At the hearing of the injunction suit (HCCC 2324 of 1996), counsel for Spectre International Ltd cited the Collins English Dictionary with regard to the meaning of plant, the first meaning being: "The land, buildings and equipment used in carrying on an industrial, business or other undertaking or service."

Counsel also cited a report on the "progress, problems and prospects" of the venture, dated April, 1981, 15 years earlier, which had been prepared for the Kenya Chemical & Food Corporation Ltd by the law firm of Schnader, Harrizon, Segal & Lewis, of Philadelphia and Washington, USA.

In the provisional balance sheet of June 30, 1982, under the heading 'Capital work in progress', appeared the items "Land and site development, buildings, and plant and equipment". Lumumba contended that this reference showed that the land was among the assets of the molasses company.

The application was vigorously opposed by lawyer Lee Muthoga. After lengthy legal arguments, Mr Justice AG Ringera, presiding, opined that, because the land had not been expressly itemised as an asset in the Daily Nation advertisement, Spectre had not established a prima facie case.

Because Spectre had withheld the deposit pending resolution of the case, Ringera also refused to grant an injunction against the receiver's disposal of the factory's assets. But he granted the interlocutory injunction assigning costs to the receiver, on grounds that the molasses factory was "in its death throes", was being liquidated and was therefore unable to pay any damages.

In the absence of the land on which the factory stood, Spectre withdrew from its proposed purchase of the plant. The receiver then wrote to the second-highest bidder, Equip Agencies, which by this time had also decided to steer well clear of this white elephant/hot potato. Presumably most investors would be reluctant to spend huge sums of money on a derelict, non-functioning factory standing on land over which they had no control.

And so the molasses plant stood, forlorn and unwanted and deteriorating by the day, for another three years – until the receiver decided to have another go at disposing of this towering government problem. On February 12, 1999, he wrote to those who had been the top four bidders in 1996 to ask them if they were still interested. Spectre wrote back, saying it was still interested but it wanted to confirm the present-day value, as well as the thorny issue of the status of the land.

Spectre inspected the site and found the plant buildings in a very poor condition. Time and weather had taken their toll, as had vandals. Now an even greater investment would be required to revive the factory. But Spectre wrote to Bellhouse Mwangi Ernst & Young on February 18, 1999, making an offer of shs. 120 million, 10 per cent to be paid on acceptance and the balance within 120 days. "We are in negotiation with the government over the land issues," said Spectre's letter, "and do not anticipate difficulties in that regard."

On June 9, 1999, receiver Muiruri wrote to Spectre accepting its offer of shs.120 million. Spectre had been outbid by shs.15 million by another bidder but successfully argued its case that it planned to develop the factory in accordance with the government's original aims, and not simply to cannibalise the moveable assets, as the other bidder planned. To make things crystal clear, Muiruri noted in his letter that the shs. 120 million was for the "moveable assets and not of shares or of any running business".

The land was not mentioned at all but Spectre was already pursuing its own negotiations in this regard. On April 7, 1999, Spectre general manager Israel Agina had written to Moi requesting the allocation for industrial development of the parcel of land on which the molasses factory stood. Agina noted that the land had already formerly been allocated to the Kenya Chemical & Food Corporation but that the allocation had not been completed.

What he said was true. The land had already been allocated to the molasses plant by the government, which had itself compulsorily acquired the land in 1976 for precisely that purpose. The land was previously communal land, and shs.2 million had been paid to the local community, which had ceded the land at this price only on the promise that the community would benefit from employment at the plant. The community had not otherwise been adequately compensated.

The government, having thus acquired the land, had in 1982 issued a letter of allotment to the Kenya Chemical & Food Corporation, which had paid the stand premium of shs.2.4 million to the government. All that remained was for the title to be issued, but this had not been done by the time the factory went into receivership in 1983.

And as an interesting aside, on October 29, 1983, the Municipality of Kisumu had written to the KCB, the debenture holder for the Kenya Chemical & Food Corporation, demanding land rates for the plot, unpaid since 1978. The letter contained the sentence "As you are aware, the Corporation owns 240 acres of land on which it started its operations [writer's emphasis]."

In his letter to Moi, Agina said the land remained an obstacle to the conclusion of Spectre's desired purchase of the plant, while the factory's existing assets were deteriorating rapidly. "We hope," said Agina, "to convert the idle facility into a socio-economic complex."

That hope became a reality. More than two years after Spectre was offered the company, the sale agreement was finally drawn up mid-2001. In September of that year, government letters of allotment granted a total of 114.8 hectares of land for 99 years for total fees of shs. 3,699,750, which were paid by Spectre International on October 11, 2001.

The land was to be used for horticultural, industrial, residential and educational purposes, including the growing of such crops as citrus, tomatoes, onions and cabbages, and for a school and a health clinic. All title certification, registration, search, new register, attestation, inspection, copying, survey, rent, stand premium, stamp duty, land adjudication and other fees were likewise paid by Spectre four days later, on October 15, 2001. The sale agreement was signed.

As usual, however, the transfer of title was not effected until nearly two years later. This eventually occurred in 2003 (under the Narc government), by which time Spectre had also paid the commissioner of lands all the rent arrears relating to the land for the years 1982 to 2003. Spectre then set about the huge task of rehabilitating the plant – appraising the work with professional valuers and beginning to seek expert scientific advice on appropriate crop-growing and methods of ethanol production.

It also began the search for investment partners. Eventually, Energem would take a 55 per cent controlling share, and the Kisumu Development Trust (with directors the late Joab Omino, former Rarieda MP George Ngure Ondeny and current chairman John Otega) would hold five per cent on behalf of local people, who had come together to raise shs.1.8m towards the project. Spectre would retain the remaining 40 per cent.

The rehabilitation project resulted in the commissioning of the plant in 2004. The yeast plant was completed in 2006 and the factory now produces industrial ethanol for blending with liquid (bio-fuels), potable alcohol for beverages and chemical industries, carbon dioxide, and bio and organic fertiliser yeast.

At the height of the factory's operations, a daily output of 60,000 litres was achieved, but the current precarious state of the sugar industry has affected this. Nevertheless, the company employs directly more than 500 people and indirectly another 200. At the height of its operations, it remitted an average of Sh1.2 billion to the exchequer every year. It also exports to the Comesa countries.

The Kisumu Molasses Factory has partnered with local schools to build laboratories and boreholes, and to provide electricity and clean drinking water. It conducts a free medical camp every three months for the entire Kisumu area, bringing in doctors and buying medication, all of which is provided free of charge to the 6,000-plus local residents treated. It is helping in efforts to control and eradicate water-borne diseases in the area.

So, from a derelict, rusting, useless hulk to a fully functioning industry bringing benefits to local residents through employment, education and health, and contributing more than a billion shillings annually to the Treasury, the Kisumu Molasses Plant has been a huge success story.

Unfortunately, huge success stories can lead to terrible jealousy, as Ouko's case also so sadly demonstrated. A Commission of Inquiry into the Illegal/Irregular Allocation of Public Land was appointed by President Mwai Kibaki on July 4, 2003. It presented its report, commonly known as the 'Ndung'u Report', to Kibaki in June 2004.

The main part of the report lists many ways in which directors of public corporations with large public land holdings had misused their positions to make these organisations – for which they had a duty of care and a responsibility to the public – fail, so that the assets could be sold off cheaply for private gain.

The commission found that such state corporations' land was illegally allocated "in total disregard of the law and public interest". It said no justification for the allocation of such land could be found in any of the records, and that subsequently "the lands so allocated were then sold by the allottees to other state corporations for colossal amounts of money far in excess of the prevailing market value of the land. This way, many individuals were unjustly enriched at great expense of the people of Kenya."

The report went on to detail how "the loss of corporation land was triggered by the actions of the Commissioner of Lands", whose office would engage in some "specially designed correspondences" prior to wrongly granting title to individuals or their third part proxies "The corporation management would wake up to a rude fact that their land had been acquired and title issued thereto without their knowledge," said the report, adding that another ploy was the illegal allocation of state corporation land after "irregular surrenders" of that land.

"The allottees would sell the land so illegally acquired," said the report, so that "in a space of say three months, a civil servant, a politician, a political operative, etc, would transform from an ordinary Kenyan, financially struggling like many others, into a multi-millionaire. Thanks to the rampant illegal allocation and sale of state corporation land."

The report cited Kenya Railways, Kenya Agricultural Research Institute, Kenya Power & Lighting Co Ltd, Kenya Airports Authority and Kenya Industrial Estates as among many state corporations that "lost huge chunks of their land in these circumstances". None of this applied in the case of the Kisumu Molasses Factory.

But despite this, the allocation to Spectre International Ltd of land on which the molasses plant stands is also mentioned in the report, which concluded that the "direct allocation of alienated government land to the company by the commissioner of lands was illegal". This conclusion would appear to be in direct contradiction of the facts, as detailed above, which are that:

• The land on which the molasses factory stands was acquired compulsorily by the government for the purpose of building the molasses plant.

• The land was already allocated to the molasses plant in 1982, though the transfer had been only partly completed by the time the company went into receivership in 1983.

• The land was properly allocated a second time, this time to Spectre International, in 2001.

• Spectre paid 20 years' rent arrears and all the necessary government fees for the land.

• The land has been used for the economic realisation of the original objectives of the government, of the investors and of the local community.

• It was government land, and government is not in the business of selling land. Government merely allocates land for industrial and other development. This is a normal procedure and it is precisely the procedure properly followed in the case of the molasses plant.

As in no other case investigated by the Ndung'u Commission, the land on which the Kisumu Molasses Plant stands has been used for the purposes stated. A hugely successful company has been established on it, which has been of immense benefit to the country via the returns the plant remits to the Treasury every year, and to the local population through jobs, education and health care. And its success is down to the determination of one man, Raila Odinga. Let no one tell you otherwise, for whoever does so is not telling you the truth.

Many have tried to say that Mr Odinga took money for the plant from local people and converted it to his own use. This is totally false and blatant propaganda. The shs.1.8 million raised by the local community is safe, in the form of the five per cent shares in the hands of the Kisumu Development Trust. The contributors will begin to see returns on their investment when the Kisumu Molasses Factory becomes a publicly quoted company on the stock exchange.

Before any company can go public, it is required to have made a profit for two consecutive years. Spectre had huge commitments, loans and other expenses to meet in the course of the massive task of reviving the molasses plant. But it eventually it began to be a profitable concern, and it was intended that the company would be listed last year, 2011.

Unfortunately, the major shareholder, Energem, then went bankrupt. This led to the need for major restructuring and a search for another strategic partner. This was found, but the sugar industry problems have meant that the plant's output has not yet been steady enough to qualify for stock exchange listing. It is hoped this might happen next year.

In the meantime, the silence from anyone whose interests are being safeguarded by the Kisumu Development Trust is deafening. What is more, the company's doors are open to anyone who feels aggrieved, and the fact the Trust chairman John Otega is the company's human resources manager makes this all the easier. All the noise that is heard comes only from those interested in political propaganda.

So that is the story, and all receipts, correspondence and certificates of allocation relating to the purchase of the Kisumu Molasses Factory and the land on which it stands are available for inspection.

Land remains generally a very interesting and potent matter and, now that we are on the subject, what about all those other issues in the Ndung'u Report, issues that involve billions in public funds lost to this nation, massive issues that absolutely dwarf the Kisumu Molasses Factory – where no issue at all exists? Is anybody going to start talking about those?

The writer is a freelance journalist.

Haji links Assistant Minister to Tana deaths

Updated 4 hrs 13 mins ago
By Standard Team
Assistant minister Dhado Godhana was implicated in the clashes that rocked Tana River County in Parliament, as authorities claimed politicians fanned the conflict in which 52 people were killed.
Acting Internal Security minister Yusuf Haji told Parliament he had ordered police to investigate Godana over his alleged role in the Tana Delta clashes.
Haji said he had directed the Criminal Investigations Department to question the Galole MP as he claimed the attacks were politically instigated.
The minister said top security teams held a meeting with leaders from the clash-torn area Thursday morning, but Godhana said hewould not attend.
Nominated MP Rachael Shebesh charged that MPs who incite people to kill one another should not be allowed in Parliament.
"If he (Godhana) will not be questioned, then we will be failing as a nation," she added.
Yatta MP Charles Kilonzo said the Assistant minister should first be fired and then investigated.
"Sack the man first and then we can talk about the other matter later," he added.
Even as MPs expressed anger over the Tana River killings, reports indicated that two more people were killed last evening as the Mandera inter-clan clashes spilled to Wajir County. So far, 13 people have been killed in the violence raging in Mandera. More than a dozen others were seriously injured in the clashes between members of the Degodia and Gare clans in Waberi location at the heart of Wajir town.
Meanwhile casualties of Wednesday's dawn attack on Rekite Village in Tana River County recuperated in hospitals as security chiefs visited the clash-torn region where 52 people were killed.
Gloom engulfed the village, 120km south of Hola, the county's capital, as those killed in the inter-ethnic conflict were buried in mass graves.
There were fears as to the fate of about 50 villagers whom the local aid workers said were still missing from the violence said to be the Pokomo retaliation attack on the Orma.
Kenya Red Cross Secretary-General Abbas Gullet claimed that 3,000 people had fled their homes following the violence and required urgent humanitarian assistance.
Angry residents jeered Police Commissioner Mathew Iteere and Administration Police Commandant Kinuthia Mbugua, accusing security forces of failure to prevent the attacks.
A gathering addressed by Coast PC Samuel Kilele and the security chiefs was momentarily disrupted as people scurried for safety after word went round that skirmishes had erupted in Onido Village.
Iteere had a rough time convincing the audience of mainly ethnic Orma that the reports were inaccurate.
"I have just flown from Onido Village and I can confirm to you that there is no attack as had been alleged,"?he said.
Meanwhile, overwhelmed Witu and Mpeketoni dispensaries referred about 22 patients, some with arrows lodged in their bodies and bullet wounds to Malindi District Hospital.
Medical personnel said one patient with multiple abdominal injuries had been flown to the Coast Provincial General Hospital for specialised attention.
Eight women with bullet wounds and two children, who had extensive burns, were among those admitted to the district hospital.
And as acting Internal Security minister Yusuf Haji in Nairobi ordered immediate disarmament of civilians, The Standard team spotted some residents armed with guns not far away from where authorities addressed a baraza.
Some openly claimed that they were arming to defend Rekite Kubwa, Nairobi, Rekite Ndogo and Onido villages, which they claim were under threat of attack. Close to 700 people had fled their homes by Thursday.
The source of their guns was not known. The PC told the residents: "I will not leave this place until all of you hand over your guns to the police."
By Thursday, no gun had been recovered and no suspect had been captured a week after a similar disarmament ultimatum was issued by the PC. In Parliament, Haji said locals were incited to attack each other. "Apart from the drought and pasture problems, the clashes had some political instigation".
Nominated MP Maison Leshomo said Godhana confided in her that he would not be attending any meeting convened by Haji.
Gichugu MP Martha Karua asked Haji to state the action that the Government would take against the perpetrators of the violence.
Sponsored violence
She challenged the minister to name the politician who incited locals or sponsored the violence.
Responding to a question by Kamukunji MP Yusuf Hassan on what measures the Government was taking to avert clashes, the minister said security would be beefed up.
Gem MP Jakoyo Midiwo alleged that he received a text message from an intelligence officer telling him that the Tana Delta violence was politically instigated.
"The officer told me to come and raise the matter at the floor of the House," he added.
Kilgoris MP Gideon Konchella told the minister: "Use your power to stop any such occurrence in the future."
In Nairobi, Haji warned that all provincial administration officials would be held accountable if more attacks happen.
"We have agreed that the Government will conduct an operation to disarm all communities illegally armed in the country and reinforce security in the affected areas," said Haji.
The minister spoke after a meeting with MPs from the Tana Delta and North Eastern, which have been rocked by ethnic clashes.
Those who attended the meeting at Harambee House included MPs Adan Duale, Adan Keynan, Abdikadir Mohamed, Mohamed Elmi, Maamud Mohamed, Mohamed Affey, Farah Maalim, Hassan Mohamed, Danson Mungatana, Mohamed Hussein, Adan Sugow, Abdi Sasura, Mohamed Nur and A. Hassan.

48 dead in ethnic clashes in Kenya

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Published: Aug. 22, 2012 at 1:04 PM
NAIROBI, Kenya, Aug. 22 (UPI) -- Police said Wednesday that clashes between rival ethnic groups in southern Kenya left at least four dozen people dead.
Kenyan authorities said fighting between the Orma and Pokomo ethnic groups left at least 48 people dead in some of the worst fighting since disputed presidential elections in 2007. Police said many of the victims were women and children killed with machetes, the BBC reports.
The BBC reports that clashes between the two ethnic groups are common but the level of violence is rare. Both sides have fought over grazing and water rights in the past. Similar fighting in 2001 left at least 130 dead in the region.
The International Criminal Court in January charged four high-ranking Kenyan officials with crimes related to conflicts that erupted after 2007 elections. More than 1,000 people were killed in fighting between supporters of incumbent President Mwai Kibaki and those of rival Raila Odinga.
Odinga was later appointed prime minister in a power-sharing deal with Kibaki. Kenya has elections early next year.

48 villagers killed in revenge attack

By NATION TEAM newsdesk@ke.nationmedia.com
Posted Wednesday, August 22 2012 at 23:30

In Summary

  • The attack is believed to be in revenge for another one a week ago at a village called Kau, in Kilelengwani
  • Garsen MP Danson Mungatana accuses the government of laxity and "reluctance to act" to stop the attacks
  • Earlier, the Kenya Red Cross had estimated the number of dead at "between 30 and 50"
Forty-eight people, including 11 children, were massacred on Wednesday morning in a fight over water and pasture in Tana River County.
In what is believed to be a revenge attack, the Orma residents of Riketa village, Tarasa division, deep in the swamps of the Tana delta were set upon by raiders thought to be from the Pokomo.
The attack is believed to be in revenge for another one a week ago at a village called Kau, in Kilelengwani, some 10 kilometres from Riketa, in which suspected Orma herdsmen killed three Pokomo villagers, injured six others, killed livestock and burnt homes.
The two ethnic groups have a long history of conflict over access to the waters of Tana River and the fertile lands of the delta.
Wednesday's raid, in the early hours of the morning, caught the villagers unawares.
Local leaders reacted with fury, accusing the government of failing to prevent the clashes.
Garsen MP Danson Mungatana accused the government of laxity and "reluctance to act" to stop the attacks. He demanded an immediate ministerial statement.
Whereas preventing conflict in the inaccessible swampland might be difficult, government officials did not seem to have fresh ideas on how to approach the clashes.
And the suspected Orma herdsmen believed to have been responsible for the Kau killings have not been arrested.
"We cannot take a whole community to jail. Is it possible?" asked Coast provincial commissioner Samuel Kilele.
Conducting patrols
Coast deputy police boss Robert Kitur said among the dead were 31 women, 11 children and six men.
Police are now on the ground in strength — a contingent of 200 officers from the Administration Police, regular police and the General Service Unit has been deployed to end the tit-for-tat blood-letting.
"I am on my way there right now, but as we speak, 200 officers are on the ground and have taken charge of the situation, conducting patrols and ensuring safety of the residents," Mr Kitur told the Nation in a telephone interview.
He said the killings were a retaliation by the Pokomo against the Orma over the Kau attack.
Earlier, the Kenya Red Cross had estimated the number of dead at "between 30 and 50".
Mr Sadique Kakai, KRC's head of disaster response in Coast region, said: "We have reports that the dead range between 30 and 50."
Coast police chiefs were earlier tight-lipped about the attack as they went into a meeting with Mr Kilele.

The secretary of the council of Imams and preachers Sheikh Mohammed Khalifa appealed to both oromos and pokomos to end the killings. He said it was unfortunate since both were muslims. Mr khalifa are you saying it could have been OK if it was between Christians and Muslims?? I believe the right message should have been " it was unfortunate since both are KENYANS". It's about time we start looking at and appreciating each other as Kenyans. We are all same people Oromos pokomos kambas Giriamas kikuyus Rendilles etc muslims and christians we are brothers and sisters. What happened to the spirit of Harambee?? lets all pull together and help each other. My sincere condolences goes to those who lost their loved ones. And this is enough evidence that in this day and error the Kenya Govt is not capable of protecting it's people.

The news in my home country (The Netherlands) reported on this massacre. The image of Kenya is deteriorating. And this hurts me, as Kenya is in my heart. It becomes increasingly difficult to convince my Dutch friends and family of Kenyas beauty and kind people. Since the election violence is has been a slow but constant flow of negative news: killings, muggings, abductions, poaching/cattle rustling. As a result there are no holiday offers to travel to Kenya. If you want to rely on tourism as a source of income; I suggest it be taken more seriously.
Solve the land / cattle / housing problem! Let the big fish share their land or something: find a solution.

ftmwang2 days ago

The only solution to this conflict is first to treat the attackers as arsonists,murderers,evil etc.Then hunt them down and no matter how many they are should be locked in seriously and be dealt with in accordance with the law.As a matter of fact the military and police personnel should be deployed there and establish an emergency response units by air and all means possible.The intelligence units should be enhanced in those areas.There must be police and military patrol at all times in those areas.Emergency response system should enhanced in the entire country and drills should be carried out every so often to test their response.The response under no circumstance should not exceeds five minutes.I believe this is possible.
Poleni,this is beyond words,very sad.This is a war going on here and what measures has the government been taking.This is a genocide.While other countries that have been at war are striving to make peace,Kenya is doing the opposite and the elections are not yet,just wait.

What is wrong with Kenyan intelligent, NSIS? how come they never saw this coming? are this guys sleeping on there jobs or what is happening? NSIS is now reduced just to do political witch hunting instead of collecting intelligent to protect poor Kenyans. Very sad indeed to lose women and children who did not deserve to be butchered like that. Kenyan security agents need to be on alert all the time...

Marende warns against cutting MPs' pay

Updated Friday, August 24 2012 at 00:00 GMT+3
National Assembly Speaker Kenneth Marende has told Salaries and Remuneration Commission (SRC) to forget about slashing MPs' pay.
Marende drew parallels between MPs' pay and what commissioners and other State officers earn as he laboured to convince a forum convened by the Salaries Commission, that legislators' earnings are modest.
The Speaker cautioned the commission against considering chopping MPs' pay due to public outcry.
Instead, Marende urged SRC chair Sarah Serem to consider other State employees to harmonise salaries.
"The commission is to take into account the principle that total public compensation bill is fiscally sustainable. That is important. But I urge the commission not to interpret this in a manner that makes MPs easy target because they are not the quick answer to their dilemma," said Marende.
The Speaker said the Sh851,000 pay for MPs was incomparable to what other State officers, who Parliament vets for approval for nomination into office, earn.
He said MPs' salaries and allowances are by far less that Sh1.5 million earned by Kenya Revenue Authority Commissioner General John Njiraini and his commissioners, who he said take home Sh1 million, and PS in the Ministry of Finance Joseph Kinyua, who earns Sh 1.13 million.
Marende drew other comparisons arguing that MPs earn lower salaries than that of chairman of Commission on Implementation of Constitution (CIC) Charles Nyachae, who he said takes home Sh1.24 million, while members of his commission draw from public coffers Sh1.14 million.
Sitting allowances
"CIC reports to a committee of National Assembly on implementation of the Constitution, whose members earn Sh851,000," stated Marende.
He said that while members of Judicial Service Commission earn sitting allowances of Sh 80,000 per session, those of Parliamentary Service Commission earn Sh10,000 and members of parliamentary committees get Sh5,000.
Speaking at the forum, which saw the launch of job evaluation for State officers and other constitutional office holders, acting Head of Public Service Francis Kimemia urged salaries commission to be firm to ensure rationalisation of pay for public servants.
Ms Serem promised that her commission will be bold in setting remunerations, saying they would be fair and give packages based on work of officers.

The Star (Nairobi)

Kenya: Women Seek Justice Over Sterilisation

By Henry Kibira, 23 August 2012
Photo: Tami Hultman/allAfrica
Mother and daughter in HIV clinic (file photo): Some of the victims say they have endured a life of loneliness and ostracism because they can no longer have children.
Over 40 HIV-postive women who were allegedly sterilized against their will go to court to demand justice and possible compensation.
The chairperson of the National Gender and Equality Commission Winfred Lichuma who is championing the women's cause described what happened to the women as "atrocious an infringement of their human rights and contrary to medical ethics."
"Those responsible should be punished to the fullest extent of the law," Lichuma said during the launch of a report on coerced sterilization of HIV women by medical personnel. The study was conducted this year in Kakamega and Nairobi.
According to the report, most of the forced sterelisations -75 per cent- were conducted in public hospitals while the rest were carried out in private hospitals. Majority of the women are from low income cadres of society. Most of them claim they were not aware and did not understand what they were being asked to sign as they were in active and difficult labour at the time. Some of the women were also unconscious and could therefore not give consent or are illiterate and were asked to sign a document which turned out to be an authorization for the procedures.
In some instances, some of the women especially those whose operations were done in the public hospitals, were told that the procedure was government mandated for all HIV-positive women. According to the report-Robbed of Choice: Forced and Coerced Sterilization Experiences of Women Living with HIV in Kenya- some of the women were also told threatened with having their supply of anti-retroviral drugs stopped if they did not agree to the operation.
Yesterday, some of the women victims- majority of them in their mid-to late-20s narrated how they have had to endure a life of loneliness and ostracism as they could no longer have children. "Most of the men who have approached me for marriage want children. The moment they realize l cannot have babies, they leave," Ruth Achieng, a survivor of the coerced sterilization who lives in Nairobi's Kibera slums said.
The women also suffer from other post-sterilisation complications which include the inability to have monthly menstrual cycles apart from marriage break-ups. "Most of these people continue to live in pain silently, as they fear talking about their conditions as a result of stigmatization and discrimination," Faith Kasiva, the lead researcher of the African Gender and Media Initiative which conducted the survey. She called for an all-inclusive public awareness campaign on reproductive health rights and choices for women living with HIV, to enable them make informed choices.
Lichuma said the commission will push for the rights of the women to get access to their medical records to help them in their court case which will demand among others, a reversal of the operation or compensation where this is not possible. Forced sterilisation is also considered a crime against humanity under the Rome Statute and is prosecutable by the International Criminal Court. The issue of forced sterilization is neither small nor new in African according to the international lobby group, Stop Torture in Health. There are several cases pending before the courts in Zambia, South Africa, Malawi and Nambinia.
Just last month, a court in Namibia ruled it was illegal for the government to sterilize without their consent, three HIV-positive women. The court rejected the government's claims that the sterilisations had been consensual and said poor record keeping in the hospitals had left the women with no defense, and rejected the government's claims that the sterilizations had been consensual.
The court stopped short of ruling that the pattern of forced sterilizations of HIV-positive women in Namibia constituted discrimination and is yet to decide on the women's demand of compensation amounting to US$150,000 (Sh12.5 million). In 2009, Rwanda was forced to withdraw a Bill that would have made AIDs-testing compulsory and permitted the forced sterilization for people deemed to be mentally disabled. Sterilisation is usually an irreversible operation. It is possible to have a tubal ligation reversed, but its success will depend on the method used. It is also a very costly affair and the success rate is usually not very promising

The Star (Nairobi)

Kenya: Sh0.5 Million Poll Fee On Women Ill-Advised

16 August 2012


Women aspiring to contest various elective positions in the March 4th 2013 election have faulted the IEBC for what they termed as prohibitive ... ( Resource: Kenya: Women Aspirants Protest Poll Requirements
A proposal by the IEBC that all candidates joining the race for women representatives pay a hefty Sh500,000 nomination fee each is, to say the least, ill-advised.
The proposal goes against the spirit and letter of the constitution which stipulates that each of the 47 counties reserves at least one seat for women. These women-only seats are expected to help in meeting the gender quota as well as encouraging the active participation of women in politics.
The IEBC proposal will not only bar majority of the women from presenting their candidature but is also discriminatory as only those women who have the financial muscle to pay the nomination fee will be able to run for office. This will perpetuate the misguided belief that politics is only for the moneyed few and that a public spirited individual without cash cannot be elected to office.
The reason for having the affirmative action clause in the constitution was to break with a past and present that gives the impression that politics is a male-only club. By proposing such a hefty nomination fee, the IEBC is encouraging he creation of yet another club - that of moneyed women! We urge the IEBC to drop the nomination fee requirement as far as elections for the women representatives are concerned.

Common Market of Eastern and Southern Africa, COMESA

The free trade area and common tariff structure

Establishment and member countries

The Treaty establishing COMESA was signed on 5th November 1993 in Kampala, Uganda and was ratified a year later in Lilongwe, Malawi on 8th December 1994. Member countries are Angola, Burundi comoros, D.R. Congo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seycelles, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
COMESA replaced the former Preferential Trade Area (PTA) which had existed from the earlier days of 1981. COMESA was established 'as an organisation of free independent sovereign states which have agreed to co-operate in developing their natural and human resources for the good of all their people.'
Its main focus is on the formation of a large economic and trading unit that is capable of overcoming some of the barriers that are faced by individual states. By the year 2000, all internal trade tariffs and barriers will be removed. Within 4 years after that COMESA will have introduced a common external tariff structure to deal with all third party trade and will have considerably simplified all procedures. It has a wide-ranging series of other objectives which necessarily include in its priorities the promotion of peace and security in the region.

History of COMESA

At the first and second conferences of independent African States, held in Accra, Ghana, in April 1958 and in Addis Ababa, Ethiopia in June 1960, respectively, economic problems to be faced by independent Africa were discussed. There was a consensus that the smallness and fragmentation of post-colonial African national markets would constitute a major obstacle to the diversification of economic activity, away from a concentration on production of a narrow range of primary exports, to the creation of modern and internationally competitive enterprises, which would satisfy domestic needs and meet export requirements. It was, therefore, agreed that African countries which had gained political independence, should promote economic co-operation among themselves.
Two options were advocated for the implementation of the integration strategy in Africa: a) the Pan-African, all-embracing regional approach, which envisaged the immediate creation of a regional continental economic arrangement; and b) the geographically narrower approach that would have its roots at the sub-regional levels and build on sub-regional co-operation arrangements to achieve geographically wider forms of co-operation arrangements.
The majority of the countries favoured the narrower sub-regional approach. Based on this, the United Nations Economic Commission for Africa (ECA) proposed the division of the continent into four sub-regions: Eastern and Southern, Central, West and North Africa. The Commission's proposals were adopted by the OAU Conference of Heads of State and Government. All independent African Sates were enjoined to take, during the 1980's, all necessary steps to strengthen existing sub-regional economic co-operative groupings and, as necessary, establish new ones so as to cover the whole continent sub-region by sub-region and promote co-ordination and harmonization among the groupings for the gradual establishment of an African Economic Community by the end of the century.
The origins of the COMESA can be traced as far back as the mid-sixties. Before the Lagos Plan of Action and the Final Act of Lagos were adopted, the countries of Eastern and Southern Africa had already initiated the process towards creating an Eastern and Southern African co-operation arrangement.
In October 1965, the ECA convened a ministerial meeting of the then politically independent states of eastern and southern Africa to consider proposals for the establishment of a mechanism for the promotion of sub-regional economic integration. The meeting, which was held in Lusaka, Zambia, recommended the creation of an Economic Community of Eastern and Southern African states. To achieve this objective, the meeting also recommended that an Interim Council of Ministers, assisted by an Interim Economic Committee of officials, should be set up to negotiate the treaty and initiate programmes on economic co-operation, pending the completion of negotiations on the treaty.
At the first meeting of the interim Ministerial Council held in Addis Ababa, in May 1966, the Terms of Association to govern the interim arrangements before the signing of the formal Treaty were adopted and signed by Burundi, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Somalia, Tanzania, and Zambia. In November 1967, a meeting of the Interim Economic Committee of officials recommended an interim programme of action for implementation which would be integrated into the Treaty when approved. Parallel with these developments, two other organizations were established, the Pan-African Freedom Movement in East, Central and Southern Africa (PAFMECSA), and the conference of East and Central African states. Although these were mainly political in their orientation, their membership extended beyond the sub-region and they included in their activities programmes on economic co-operation.
In the 1970's, the need for a sub-regional economic arrangements became more urgent as a result of three major developments. First, the collapse of the federations in Eastern and Central Africa reduced political co-operation amongst States of the region and this needed to be addressed. Second, the destabilization of the economies of the southern African States by apartheid South Africa made it necessary to create, as a matter urgency, a sub-regional organization which would be an economic counterweight to South Africa. Third, despite the failure of earlier efforts to establish a sub-regional economic co-operation arrangement, the countries of Eastern and Southern Africa recognised that there was no alternative to reducing their traditional economic dependence on the industrialized countries of the north and that this could only be done through the adoption of self-sustaining development measures in all sectors.
In March 1978 the First Extra-ordinary meeting of Ministers of Trade, Finance and Planning met in Lusaka. The meeting recommended the creation of a sub-regional economic community, beginning with a sub-regional trade area which would be gradually upgraded over a ten-year period to a common market until the community had been established. To this end, the meeting adopted the "Lusaka Declaration of Intent and Commitment to the Establishment of a Preferential Trade Area for Eastern and Southern Africa" and created an Inter-governmental Negotiating Team on the Treaty for the establishment of the PTA. The meeting also agreed on an indicative time-table for the work of the Intergovernmental Negotiating Team.
After the preparatory work had been completed a meeting of Heads of State and Government was convened in Lusaka on 21st December 1981 at which the Treaty establishing the PTA was signed. The Treaty came into force on 30th September 1982 after it had been ratified by more than seven signatory states as provided for in Article 50 of the Treaty.
The PTA Treaty envisaged its transformation into a Common Market and, as such, the Treaty establishing COMESA was signed on 5th November 1993 in Kampala, Uganda and was ratified a year later in Lilongwe, Malawi on 8th December 1994.
The process of economic integration in Eastern and Southern Africa has, therefore, not been episodic, but rather systematic, following a logical progression on a step by step basis. Firstly, a Preferential Trade Area was established and operated for over a decade, which was then transformed into a common market. The third phase will involve the eventual establishment of an Economic Community.
The Treaty establishing COMESA binds together free independent sovereign States which have agreed to co-operate in exploiting their natural and human re- sources for the common good of all their peoples. In attaining that goal, COMESA recognises that peace, security and stability are basic factors in providing investment, development, trade and regional economic integration. Experience has shown that civil strives, political instabilities and cross-border disputes in the region have seriously Affected the ability of the countries to develop their individual economies as well as their capacity to participate and take full advantage of the regional integration arrangement under COMESA. It has now been fully accepted that without peace, security and stability there cannot be a satisfactory level of investment even by local entrepreneurs.
Therefore, in pursuit of the aims and objectives stated in Article 3 of the COMESA Treaty, and in conformity with the Treaty for the Establishment of the African Economic Community signed at Abuja, Nigeria on 3rd June 1991, the member States of COMESA have agreed to adhere to the following principles:
(a) equality and inter-independence of the member States;
(b) solidarity and collective self-reliance among the member States;
(c) inter-State co-operation, harmonisation of policies and integration of programmes among the member States;
(d) non-aggression between the member States;
(e) recognition, promotion and protection of human and people's rights in accordance with the provisions of the African Charter on Human and People's Rights;
(f) accountability, economic justice and popular participation in development;
(g) the recognition and observance of the rule of law;
(h) the promotion and sustenance of a democratic system of governance in each member State;
(i) the maintenance of regional peace and stability through the promotion and strengthening of good neighbourliness; and
j) the peaceful settlement of disputes among the member States, the active co-operation between neighbouring countries and the promotion of a peaceful environment as a pre-requisite for their economic development.
COMESA is an all-embracing development organisation involving co-operation in all economic and social Sectors. However, due to resources Constraints, the implemen- tation of activities and programmes will be prioritised to areas where the greatest impacts can be made. To that end, the first COMESA Authority of Heads of State and Government, at its meeting held in Lilongwe, Malawi from 8th to 9th December 1994, adopted the following five priorities to be the basis of COMESA's focus for the next five to ten years.'
  • significant and sustained increases in productivity in industry, manufacturing, processing and agro-industries to provide competitive goods as the basis for cross-border trade and to create more wealth, more jobs and more incomes for the people of the region;
  • increase agricultural production, with special emphasis on the joint development of lake and river basins so as to reduce dependence on rain-fed agriculture and new programmes on food security at the provincial or district levels, national and regional levels;
  • development of transport and communications infrastructures and services with special emphasis on linking the rural areas with the rest of the economy in each country as well as linking the member States
  • new programmes for trade promotion, trade expansion and trade facilitation especially geared to the private sector, so as to enable the business community to take maximum advantage of the Common Market, and
  • development of comprehensive, reliable and up to date information data bases covering all sectors of the economy including industry, energy, environment, agriculture transport, communications, mvestment and ftnance, trade, health and human resources to form the basis for sound investment decisions and macro-econoinic policy formulation and programming.
The aims and objectives of COMESA have been designed so as to remove the structural and institutional weaknesses in the member States by pooling their resources together in order to sustain their development efforts either individually or collectively. These are as follows:
  • to attain sustainable growth and development of the member States by promoting a more balanced and harmonious development of its production and marketing structures;
  • to promote joint development in all fields of economic activity and the joint adoption of macro -economic policies and programmes; to raise the standard of living of its peoples, and to foster closer relations among its member States;
  • to co-operate in the creation of an enabling environment for foreign, cross-border and domestic investment, including the joint promotion of research and adaptation of science and technology for development;
  • to co-operate in the promotion of peace, security and stability among the member States in order to enhance economic development in the region;
  • to co-operate in strengthening the relations between the Common Market and the rest of the world and the adoption of common positions in international fora; and
  • to contribute towards the establishment, progress and the realisation of the objectives of the African Economic Community.
The COMESA agenda is to deepen and broaden the integration process among member States through the adoption of more comprehensive trade liberation measures such as the complete elimination of tariff and non-tariff barriers to trade and elimination of customs duties; through the free movement of capital, labour, goods and the right of establishment; by promoting standardised technical specifications, standardisation and quality control; through the elimination of controls on the movement of goods and individuals; by standardising taxation rates (including value added tax and excise duties), and conditions regarding industrial co-operation, particularly on company laws, intellectual property rights and investment laws; through the promotion of the adoption of a single currency and the establishment of a Monetary Union; and through the adoption of a Common External Tariff (CET).
By agreeing to the above, member States have agreed on the need to create and maintain:
  • a full free trade area guaranteeing the free movement of goods and services produced within COMESA and the removal of all tariffs and non-tariff barriers;
  • a customs union under which goods and services imported from non-COMESA countries will attract an agreed single tariff all COMESA States;
  • free movement of capital and investment supported by the adoption of common investment practices 50 as to create a more favourable investment climate for the entire COMESA region:
  • a gradual establishment of a payments union based on the COMESA Cleaning House and the eventual establishment of a common monetary union with a common currency;
  • the adoption of a common visa arrangement, including the right of establishment leading eventually to free movement of bona fide persons.
COMESA is to establish a Free Trade Area (FTA) by the year 2000 and all countries are supposed to have reduced tariffs by 80% as at October 1996. In fact, only 5 countries (Comoros, Eritrea, Sudan, Uganda and Zimbabwe) have reached this level, with Kenya, Malawi and Mauritius on 70% and processing the 80% level. Tanzania is also currently processing the 80% tariff reduction, which is now before parliament. All other countries, except Angola, Ethiopia and Zaire (which have yet to reduced tariffs by the 60% reduction rate), and those countries which still enjoy a derogation from publishing these tariffs (Lesotho, Swaziland and Namibia) have reduced tariffs by either 60% or 70%.
The problems some countries face are that they are applying tariff reduction rates to already low national rates, leading to inequitable revenue losses and making exports to countries with higher national rates less competitive. There is also a problem with application of the tariff reduction programme at different stages by different countries. Although these problems are seen as temporary, if the FTA is achieved by 2000, and can also be addressed through the principle of reciprocity, the COMESA Secretariat needs to continue to assess the revenue implications the application of the tariff reduction programme is having on individual COMESA countries and, where possible, suggest ways in which reduced revenues from reduced tariff rates can be compensated for, if only in the short-term and in this area the Secretariat may require the assistance of short-term technical assistance inputs.
A further problem to be addressed is the inherent inconsistencies in the implementation of the FTA of COMESA, the proposed SADC FTA and the CBI tariff reduction programme, although this may not constitute a problem, de facto, as if all COMESA countries abide by the agreed timetable of implementing a COMESA FTA only two countries in SADC (South Africa and Botswana) will not have implemented a FTA. However, this is an area in which the COMESA Secretariat will need to work closely with the SADC Secretariat to ensure that implementation of the respective free trade protocols are not contradictory and again this is an area in which the COMESA and SADC Secretariats may need to request the support of short-term technical assistance inputs.
One of the principle mechanisms through which COMESA member States will fulfil the provisions of the COMESA Treaty to simplify and harmonise their customs procedures and documents, to standardise the collection of reliable, accurate and up-to-date trade statistics, to facilitate trade in the region is through the implementation of the Automated System for Customs Data and Management (ASYCUDA) and EuroTrace.
The objective of ASYCUDA/EuroTrace is to assist the business community to clear goods faster from customs areas, make available up-to-date and accurate international trade statistics, modernise customs administrations and, through improved efficiencies, increase the revenues of COMESA member States.
ASYCUDA is being implemented in 13 COMESA countries (Burundi, Comoros, DR Congo, Madagascar, Mauritius, Rwanda, Sudan and Zimbabwe), with formal requests for the system having been received from Malawi, Swaziland and Zambia and projects underway in Eritrea, Ethiopia, Namibia, Tanzania and Uganda.
The assistance of the donor community, at the level of installing ASYCUDA/EuroTrace at the national level (involving supply of computer hardware and initial technical assistance) and at the regional level (through the provision of regional support to the national systems from the COMESA Secretariat) is welcome.
Related to the establishment of a Free Trade Area is the elimination of Non-Tariff Barriers (NTBs) and the simplification of COMESA Rules of Origin and Value Added Criteria.
Steady progress has been made in elimination of non-tariff barriers (NTBs) such as in liberalisation of import licensing, removal of foreign exchange restrictions and taxes on foreign exchange, removal of import and export quotas, removal of road blocks, easing of Customs formalities, extending times border posts are open, etc. There are, however, still a number of improvements which should be made, which should make intra-regional trade easier, such as improving the transport and communications structures, ease visa requirements, improve information, and access to information on trade opportunities, further reduce customs and bureaucratic procedures at border crossings etc. Many of these (such as improving the transport and communications infrastructure) will require significant investment and will only be achieved over a medium to long term time scale and is an area in which donor support and foreign private sector investment will be needed for some time to come.
One specific NTB is the amount of documentation required to move goods between COMESA countries. To assist with the removal of this NTB, by reducing the multiplicity of customs documents, COMESA has designed the COMESA Customs Document, or COMESA-CD, which was scheduled for introduction by all COMESA member States by 1st July 1997.
The Secretariat is currently working on the identification of other remaining non-tariff barriers and drawing up measures on ways in which these NTBs can be resolved and the assistance of the private sector and the donor community in identifying NTBs, recommending ways in which they can be reduced or removed and collaboration with COMESA on the process of their removal would be of benefit to the process of economic growth in the region.
COMESA has been working on levels of value-added content and COMESA Rules of Origin for some time now. Crown Agents carried out a study on these issues in 1994 and recommended introducing a 40% value added on ex-factory price basis and deleting the provision for 25% value added for goods of particular importance to economic development. Although these recommendations were accepted by COMESA, the Secretariat is in the process of undertaking a new study on value added and rules of origin because there are some member States which are not comfortable with the current rules of origin which give undue emphasis on value added content.
The view of the Secretariat is that rules of origin should not be based on an added value criterion alone. In fact firms will try to reduce added value, through reducing costs and becoming more efficient and so rules of origin based on just added value may be counter-productive in promoting intra-regional trade. Added value rules are also arbitrary in nature, complex to apply and introduce a high risk of fraud. Given these drawbacks the rules of origin study proposed by the COMESA Secretariat is not be limited to added value criteria only and will address other issues of regional trade.
The COMESA Secretariat would welcome donor assistance in the implementation of the study on value added content, rules of origin and related topics.

Common External Tariff

COMESA has reached an agreement to implement a Common External Tariff by the year 2004 and as this currently stands the CET will be 0%, 5%, 15% and 30% on capital goods, raw materials, intermediate goods and final goods respectively.
There are still a number of obstacles to be faced regarding the CET, not least on the levels, on compliance, on identifying alternative sources of revenue where revenue loss could result from adopting the CET, on defining the modalities of administering the CET and the categorisation of goods into the proposed CET structure.
The COMESA Secretariat would welcome the support of donors, and the involvement of the private sector, in preparing studies which come up with solutions to these obstacles in the implementation of a COMESA CET.

COMESA institutions

There are four organs of COMESA which have the power to take decisions on behalf of COMESA, these being: the Authority of Heads of State and Government; the Council of Ministers; the Court of Justice; and the Committee of Governors of Central Banks. The Intergovernmental Committee, the Technical Committees, the Secretariat and the Consultative Committee make recommendations to the Council of Ministers, which in turn make recommendations to the Authority.
  • The Authority, made up of Heads of State and Government is the supreme Policy Organ of the Common Market and is responsible for the general policy, direction and control of the performance of the executive functions of the Common Market and the achievement of its aims and objectives. The decisions and directives of the Authority are by consensus and are binding on all subordinate institutions, other than the Court of Justice, on matters within its jurisdiction, as well as on the member States.
  • The Council of Ministers (Council) is the second highest Policy Organ of COMESA. It is composed of Ministers designated by the member States. The Council is responsible for ensuring the proper functioning of COMESA in accordance with the provisions of the Treaty. The Council takes policy decisions on the programmes and activities of the COMESA, including the monitoring and reviewing of its financial and administrative management. As provided for in the Treaty, Council decisions are made by consensus, failing which, by a two-thirds majority of the members of the Council.
  • The COMESA Court of Justice is the judicial organ of COMESA, having jurisdiction to adjudicate upon all matters which may be referred to it pursuant to the COMESA Treaty. Specifically, it ensures the proper interpretation and application of the provisions of the Treaty; and it adjudicates any disputes that may arise among the member States regarding the interpretation and application of the provisions of the Treaty. The decisions of the Court are binding and final. Decisions of the Court on the interpretation of the provisions of the COMESA Treaty have precedence over decisions of national courts. The Court, when acting within it jurisdiction, is independent of the Authority and the Council. It is headed by a President and consists of six additional judges appointed by the Authority. Consideration is being given to establishing the Court of Justice in the not too distant future.
  • The Committee of Governors of Central Banks is empowered under the Treaty to determine the maximum debt and credit limits to the COMESA Clearing House, the daily interest rate for outstanding debt balances and the Staff Rules for Clearing House staff. It also monitors, and ensures the proper implementation of the Monetary and Financial Co-operation programmes..
  • The Inter-governmental Committee is a multi-disciplinary body composed of permanent secretaries from the member States in the fields of trade and customs, agriculture, industry, transport and communications, administrative and budgetary matters and legal affairs. Decisions of the Committee are by a simple majority. Its main functions include:
    • the development of programmes and action plans in all the sectors of co-operation, except in the finance and monetary sector;
    • the monitoring and keeping under constant review and ensuring proper functioning and development of the Common Market; and
    • overseeing the implementation of the provisions of the Treaty and, for that purpose, requesting a technical committee to investigate any particular matter.
  • There are 12 Technical Committees, namely, on Administrative and Budgetary Matters; on Agriculture; on Comprehensive Information Systems; on Energy; on Finance and Monetary Affairs; on Industry; on Labour, Human Resources and Social Affairs; on Legal Affairs; on Natural Resources and Environment; on Tourism and Wildlife; on Trade and Customs; and on Transport and Communications. The Technical Committees are responsible for the preparation of comprehensive implementation programs and monitoring their implementation and then making recommendations to the Council.
  • The Consultative Committee of the Business Community and other Interest Groups is responsible for providing a link and facilitating dialogue between the business community and other interest groups and other organs of COMESA
  • The Secretariat is headed by a Secretary General who is appointed by the Authority for a term of five years and is eligible for re-appointment for a further term of five years. The basic function of the Secretariat is to provide technical support and advisory services to the member States in the implementation of the Treaty. To this end, it undertakes research and studies as a basis for implementing the decisions adopted by the Policy Organs. The various activities of the Secretariat encompass: Agriculture; Transport and Communications: Industry and Energy; Trade and Customs; Monetary Co-operation; and Administration. The Office of the Secretary General includes the Legal Office, Technical Co-operation, Women in Development and an Audit Unit.
An important COMESA innovation is that the Common Market Treaty establishes a Court of Justice to oversee the legal relations within COMESA. Persons resident in the Common Market may contest the legality of acts of Common Market institutions as well as that of member States. In effect, the Treaty establishes a "legal community", being whereby entrepreneurs will be guaranteed that business decisions and transactions are not unduly frustrated by unnecessaty bureaucratic interventions.
The COMESA Court of Justice will inter alia: (a) have jurisdiction to adjudicate upon all matters which may be referred to it pursuant to the COMESA Treaty; and (b) have jurisdiction to hear disputes between COMESA and its employees that arise out of the application and interpretation of the Staff Rules and Regulations of the Secretariat or the terms and conditions of employment of the employees of COMESA, and to determine claims by any person against COMESA or its institutions for acts of their servants or employees in the performance of their duties.
Several institutions have been created to promote sub-regional co-operation and development. These include:
  • The COMESA Trade and Development Bank in Nairobi, Kenya;
  • The COMESA Clearing House in Harare, Zimbabwe
  • The COMESA Association of Commercial Banks in Harare, Zimbabwe
  • The COMESA Leather Institute in Ethiopia
  • The COMESA Re-Insurance Company (ZEP-RE) in Nairobi, Kenya
Further initiatives exist to promote cross border investment, form a common industrial policy and introduce a monetary harmonisation programme.

COMESA Achievements

  • COMESA, as well as is predecessor the PTA, has achieved a lot in the area of trade, customs, transport, development finance and technical co-operation. Impressive progress has also been made in the productive sectors of industry and agriculture.
  • Trade facilitation and trade liberalization measures are bearing fruit. Intra-COMESA trade has grown from US$834 million in 1985 to US$ 1.7 billion in 1994, an annual growth rate of 14%, and studies indicate that this can increase to about US$4 billion annually. The challenge facing COMESA is to exploit this potential further.
  • As a result of COMESA traffic facilitation measures, transport costs have been reduced by a factor of about 25% and efforts are underway to reduce them further.
  • In the sector of telecommunications, special emphasis has been placed on network development to enable direct telecommunication links through more reliable infrastructure in order to avoid third country transit systems, which prove to be very costly.
  • COMESA has established several important institutions including the PTA Trade and Development Bank, the COMESA Clearing House, the COMESA Re-insurance Company and the COMESA Leather and Leather Products Institute.
  • The PTA Bank has, over the years, been very active in promoting investments and providing trade financing facilities. The Bank's cumulative project approvals, 1995-1996, stand at USS$148 million and cumulative trade finance activities, 1992 - 1996 totalled US$345 million.
  • A number of decisions have been taken to make the COMESA Clearing House more responsive to the current needs of member States, especially the private sector, including the introduction of the COMESA Dollar to replace the UAPTA as the new Unit of Account of the Clearing House.
  • The Re-Insurance Company (ZEP-RE) has, since its etablishment in 1992, been able to carve out a reasonable share of the regional insurance business and is now transacting business in some nineteen (19) countries. The share capital has risen to US$6.07 million. By the end of 1995, the premium income realized had increased to US$7.5 million. Two additional member States acceded to the ZEP-RE Agreement in August 1996. This shows the great business potential of the COMESA region in terms of re-insurance.
  • COMESA now recognizes that in order to increase levels of intra-regional trade, there is a need to address the regulatory and policy aspects of transport and communications to make the movement of goods, services and people between countries in the region easier and cheaper; to create a legal framework and enabling environment within which private sector business can operate effectively in the region, and to harmonize macro- economic and monetary policies.
  • COMESA also recognizes the need to promote investment in the region and addresses this issue through facilitation of bilateral agreements; promoting export drives by individual member States, and identifying specific projects which have the potential to act as grnwth poles between two or more member States.
Africa as a whole will enter the next millennium facing huge economic, social and political challenges. Paramount among these are a hostile external trade environment, a large debt burden and reducing levels of Official Development Aid (ODA).
Up until the late 1980s and early 1990s most COMESA countries followed an economic system which involved the state in all aspects of production, distribution and marketing, thus denying the private sector an economic role to play, except as shopkeepers, and promoted import substitution and subsidised consumption. The theory was that successful emerging industries could be identified by the state and nurtured, through a system of subsidies, grants and protection from foreign competition behind a high tariff wall, and that these industries could then grow to a size from which they could compete against foreign firms. This did not actually happen as the domestic markets were too small, in terms of purchasing power, for industries to realise economies of scale; lack of competition resulted in poor quality goods being produced; foreign direct investment was actively discouraged, resulting in insufficient levels of investment taking place in both capital and labour and in low levels of technology transfer; and a lack of complementarity between domestic industries.
Initially, import substitution programmes were financed from domestic earnings, such as revenues realised from sale of primary agricultural commodities and minerals. As levels of revenue from these sources declined, owing to declining terms of trade and reduced efficiencies in production systems, these countries started borrowing on western capital markets, and from the World Bank and IMF, to maintain previous levels of consumption. As many of the countries concerned where at this stage considered to be middle-income countries, they borrowed at commercial rates. The borrowed money was usually not used to improve production so real levels of GDP continued to decline while expenditure levels, which had by then risen significantly, as a result of higher debt servicing payments, continued to increase.
Governments of COMESA countries faced these economic crises by continuing to borrow on international markets; placing heavy restrictions on foreign currency transactions to try to reduce capital flight; pegging the value of the local currency against freely convertible foreign currencies artificially high to reduce costs of essential imports (such as fuel which in itself caused crises in the early 1970s); using revenues from parastatal industries to finance the public sector recurrent budget, leaving little revenue for re-investment in these strategic industries, resulting in further declines in production; reducing the import bill by restricting by statute items which could be imported; and heavily subsidising all aspects of domestic agricultural production to promote self-sufficiency in food production, which only served to make agriculture sectors even more inefficient than they already were.
This package of economic policies has contributed significantly to the economic decline of the region and to Africa's gross domestic investment having fallen consistently for the last 20 years, being currently recorded at 17 per cent of GDP. Assuming that a minimum investment ratio of 20 per cent of GDP is needed to cover depreciation and repair costs, current levels of gross domestic investment leave no room to finance production expansion, productivity improvement or diversification. The net result is decreasing competitiveness on the world market and loss of market share.
Foreign direct investment (FDI) in Africa is negligible, at approximately 1 per cent of GDP. This represents 0.8 per cent of all FDI and 2.1 per cent of FDI going into all developing countries. The low levels of FDI being attracted by Africa confirms, among other things, the region's exclusion from the intra-firm network, which accounts for the largest contribution to growth of world trade, with intra-firm trade being, to a large extent, fuelled by FDI.
The COMESA region (excluding South Africa) is not yet in a position to attract FDI and portfolio funds at a level which would result in a significant economic impact, because of the real and perceived risks associated with investment in the region, and because of the perception that returns on investment in Africa are low. Risk-related aspects of investment are affected by both political and commercial factors which may threaten invested capital and/or dividend returns. Profitability of investment relates primarily to market size and the cost of doing business, the latter largely influenced by productivity and effectiveness of infrastructure.
As regards market size, Africa has many of the world's smaller states, with 7 countries with a population of less than one million, and 36 with a population of less than 10 million. Only 4 sub-Saharan countries have a population of more than 30 million. Southern Africa, without South Africa, has a total GDP of around US$30 billion (1993), about a quarter of South Africa's present GDP of US$120 billion and less than half of Israel's GDP of US$69.7 billion (1993). Similarly, the current total GDP of the COMESA region of 23 countries is only around US$90 billion, less than that of South Africa and less than half of Belgium's.
Net external financing to all African countries including South Africa, is not expected to exceed US$20 billion in 1997, which is in stark contrast to the situation in other developing regions, where FDI has become the dominant vehicle for the transfer of resources from the rich to the poorer countries.
The above problems are further compounded by the region's terms of trade which have declined by over 15 per cent since. The share of the region's trade in the world markets has also fallen by half since 1970 and accounts for less than 1.5 per cent of all world trade, placing sub-Saharan Africa at the very margins of the global economy.
In terms of African trade, there has been little structural transformation, with trade being dominated by exports of primary commodities. In 1993, 86 per cent of Africa's foreign exchange earnings were derived from primary commodities, including crude petroleum, whereas 73 per cent of the total value of imports was accounted for by manufactured goods.
Africa (including South Africa) contributes no more than 3 per cent to globally traded goods and its share of world trade has been declining steadily since 1980. Between 1980 and 1993, when world trade doubled in value, Africa's external trade remained at about the same level in absolute terms. The share of sub-Saharan Africa in world exports declined from 2.5% in 1970 to 1% in 1990, while its share in developing country exports declined from 13.2% to 4.9% in the same period. Since then the share of the continent in global trade has fallen to just over 2%.
The magnitude of COMESA's external indebtedness is also a source of serious concern. The external debt of the COMESA region has increased twenty-fold since 1970 and debt service ratios which, in 1970, were insignificant, averaged 45 per cent of export earnings in 1989-90, making the region one of the most heavily indebted in the world. While member States borrowed heavily to maintain incomes and investments, the collapse of their export earnings undermined attempts to reduce their debts. Debt relief to the COMESA region, and sub-Saharan Africa as a whole, has been limited in relation to the magnitude of the problem and inflows of Official Development Assistance (ODA) continue to decline. The aggregate external debt owed by sub-Saharan Africa, including South Africa, was US$318 billion in 1994, compared to external financing to all African countries of about US$15 billion in 1996.
On the production side, both the agricultural and industrial sectors have been in decline. For many COMESA countries, agriculture constitutes between 50 and 76 per cent of GDP but the growth of agricultural output, at an average of 2 per cent per year over the last three decades, has barely matched that of population growth, so has not contributed effectively to sustainable growth and development. Agricultural exports have declined, budgetary allocations to agriculture have remained small and inadequate and an anti-poor bias in agricultural policy across much of the region, notably through over-taxation of crops, inadequate spending on market infrastructure for small-holder producers, and insufficient investment in research of local foods have combined to adversely affected the region's trade share of exports in the world market, which has dropped by 50 per cent since 1970. Food imports are increasing at about 8 per cent a year and COMESA's current bill for cereals is over US$2 billion. This heavy and chronic dependence on food imports is particularly dangerous for COMESA, not only because it's debt and trade problems impose serious limits on it's ability to purchase food in world markets, but also because there is no guarantee that food aid and/or commercial imports will be available when needed in the required quantities and quality.
Although industry grew roughly three times as fast as agriculture in the first decade of independence, the past few years have seen an alarming reversal in many States where de-industrialisation, as a short-term effect of structural adjustment, has set in. Progress in the manufacturing sector has fallen far short of the target growth rate of 8 per cent per annum projected in the second Industrial Development Decade for Africa (IDDA II) as a result of entrenched structural rigidities, weak inter-industry and inter-sectoral linkages, lack of access to advanced technologies and poor institutional and physical infrastructure. The African continent's share of world manufacturing value added (MVA) rose from 0.7 per cent in 1970 to 1 per cent in 1982 and fell to 0.8 per cent in 1994. Most African industries have a very low capacity utilisation rate and current structural adjustment programmes have as yet to have a positive impact on the industrial sector.
Population is expanding at a rate of around 3.2 per cent, outstripping agricultural and food production and COMESA now has twice the population it had in 1965 and more than five times the population it had at the beginning of the century.
The region has also experienced, over the last few years, unprecedented droughts, leading to widespread food shortages and famine. There is growing and widespread poverty in the COMESA region, especially among the rural communities, aggravated by the decline in expenditures on social services, including health, education and public utilities, nutrition has worsened and mortality continues to increase.
There is a major crisis in employment in all countries, especially among the youth in cities and towns. Unemployment in most countries is as much as 30 per cent or more of the active labour force and under-employment is just as serious. The majority of the region's population still dwell in the villages and earn their living cultivating between one and fifteen hectares.
The COMESA region has also had to contend with civil strife, ethnic wars and political instability which have also contributed to the decline in economic growth.
In summary, the economic performance of the COMESA region has been rather disappointing over the last two to three decades, with overall economic growth of the COMESA region having averaged 3.2 per cent a year since 1960 and only marginally above the level of the region's population growth. By 1993, this region of over 280 million people, which has more than doubled its population since independence, had a total GDP of around US$90 billion, and included fifteen of the twenty-three States classified as Least Developed Countries (LDC's) by the United Nations.
Economic and social forecasts for the region suggest that the outlook for the future is promising provided member States adopt and implement strategies which will further outward-orientated regionalism in the process of becoming fully integrated into the global economy. Most COMESA countries are individually too small to achieve economies of scale in the production and marketing of their products and need to work together as a region if they are to achieve significant levels of economic growth and compete in a world market which is becoming increasingly dominated by large trading blocs.
The 1990s have seen the progressive globalisation of economic activity and an increased economic interdependence between countries. This globalisation has, in many instances, been achieved first through a process of regional economic integration. The developed world, for instance, has created regional groupings such as NAFTA, the European Union and APEC and these groupings are now poised to take full advantage of the opportunities offered by the further globalisation of the economy, under WTO rules and regulations.
If sub-Saharan Africa is to benefit from sustainable economic growth it will need to do this through trade liberalisation and regional integration. Countries and regions unable or unwilling to integrate themselves into the global economy will not benefit from growth-enhancing features of this larger integration and will be further marginalised in the world goods and capital markets. Integration tends to promote higher growth through such channels as improved resource allocation, greater competition, technology transfers and learning and improved access to foreign capital. Trade and investment tend to increase in countries which have opened themselves up to the world economies and growth itself tends to promote integration.
Intra-regional trade will therefore be an essential vehicle for the promotion of diversification and establishment of linkages between production units in different African countries. Not only will it contribute to improved productivity and greater competitiveness for African products, it will also provide a stronger basis for the effective participation of the African region in the global economy.
The consensus on the need for closer regional co-operation and integration in Africa; the view that effective co-operation and integration would assist African countries to overcome the difficulties linked to the economic fragmentation of the continent; and the disappointment in the results achieved by previous attempts to create closer regional ties is also shared by Africa's co-operating partners.
It is in this context that COMESA is promoting regional integration and, through this, regional economic growth, by emphasising measures which reduce the costs of moving factors of production, goods and services across national boundaries in the Eastern and Southern African region, with relatively low tariff barriers against third parties.
Almost all COMESA member States are implementing structural adjustment programmes, most with the support of the Bretton Woods institutions. The process of structural adjustment and economic reform at the national level make it more likely that regional integration measures will succeed, in that countries are now no longer operating under the constraints of import-substitution, industrialisation strategies. Countries which have removed exchange control restrictions, reduced tariff barriers to trade, reduced the bureaucratic obstacles to doing business (including obstacles to cross-border investment and movement of factors of production), allowed interest rates to be set by the market and implemented other fiscal, financial and structural reforms are now better placed to achieve economic integration with each other. In addition, with a few notable exceptions, countries of the region do not have the strong political differences, which existed in particular in the 1970's, and so do not restrict economic interaction with their neighbours purely on political and security grounds.
However, although these measures alleviate some of constraints on intra-regional economic activity, there have occasionally been cases where the programmes have been detrimental to regional integration. By placing trade liberalisation and deregulation measures in a regional context, COMESA is able to build upon the progress made under national structural adjustment programmes while at the same time addressing the regional dimensions of adjustment.
By taking full account of the general move away from state controlled economies in favour of more liberalised, market-determined economies and by recognising the vital role the private sector has to play in the social and economic development of the region, COMESA is uniquely positioned to assist with the process of regional integration. The priority role of the COMESA Secretariat, within the framework of the COMESA Treaty, is to take the lead in assisting its member States, through promotion of regional integration, to make the adjustments necessary for them to become part of the global economy within the framework of WTO regulations.
By taking, as its focal areas, issues of trade promotion and economic integration, COMESA is concentrating its activities on trade liberalisation and customs cooperation; administrative aspects of transport and communications to make the movement of goods, services and people between countries in the region administratively easier; promoting the adoption of a common set of industry standards; promoting the establishment of a stable and secure investment climate; creating a legal framework within which businesses can operate within the region; and playing a role in harmonising macro-economic and monetary policies.
COMESA is now poised to achieve a free trade area by the year 2000 and recent studies indicate that this process will result in intra-COMESA trade increasing from its present 8 per cent to nearly 20 per cent.
Expanded intra-COMESA trade would help overcome feast and famine surges and shortages in food supplies. It would also give industries in member States, which have been too long protected in markets that are too small, expanded markets in which to compete and enable them to expand production and exports within COMESA and with third countries.
The role of the private sector in this process of economic growth and regional integration can not be over-stressed and the economic future of the COMESA region is almost totally dependent on the performance of this sector.
The role FDI will play in the economic future of the region is also of major importance. Although COMESA can offer an attractively-sized and harmonized market of over 300 million people and although the region has large mineral and agricultural wealth in which there are exciting investment opportunities, the member States need to continue to offer a stable and attractive political and economic environment for them to attract FDI so that the region's potential can be realised in full.
For further information, visit COMESA home page: http://www.comesa.int
International Labour Office
Bureau for Workers' Activities
CH-1211 Geneva 22
Fax: +41 22 799 6570
ACTRAV Homepage: http://www.ilo.org/actrav

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Authors: Christopher Alessi, Online Editor/Writer, and Stephanie Hanson
Updated February 8, 2012

As global demand for energy continues to rise, major players like the United States, the European Union, and Japan are facing a new competitor in the race to secure long-term energy supplies: China. The economic powerhouse has increasingly focused on securing the resources needed to sustain its rapid growth, locking down sources of oil and other necessary raw materials across the globe. As part of this effort, China has turned to Africa. Through significant investment in a continent known for its political and social risks, China has helped many African countries develop their nascent oil sectors while benefiting from that oil through advantageous trade deals. However, China faces growing international criticism over its allegedly exploitative business practices, coupled with a failure to promote good governance and human rights. At the same time, complex local and regional politics are challenging China's noninterference policy in the affairs of African governments.
China's Demand for Energy
China's booming economy, which has averaged an annual growth rate of 9 percent for the last two decades, requires massive levels of energy to sustain that growth. Though China relies on coal for most of its energy needs, it is the second-largest consumer of oil in the world behind the United States. Once the largest oil exporter in Asia, China became a net importer of oil in 1993. The International Energy Agency's World Energy Outlook 2011 (PDF) projects that China will become the world's largest net importer of oil by 2020. The report estimates the country's net imports for 2011 at nearly five million barrels per day, a number it says will climb to around thirteen million by 2035.
China imports more than half of its crude oil from the Middle East, which holds nearly 62 percent of the world's reserves. According to the U.S. Energy Information Administration, of China's approximately 4.8 million barrels per day of imported crude accounted for in 2010, more than 2.2 million barrels, or 47 percent, came from the Middle East. China's second-largest source of crude imports for that year was Africa, from which it imported 1.5 million barrels per day, or 30 percent.
China now receives an estimated one-third of its oil imports from Africa (ChinaBriefing), which holds just 9 to10 percent of the world's oil reserves. Its largest African suppliers of oil are Angola, Sudan, the Republic of Congo, Equatorial Guinea, and Nigeria. Other African countries that export oil to China include Gabon, Algeria, Libya, Liberia, Chad, and Kenya.
Sino-African Trade
While the majority of Africa's exports to China are in oil, it also exports iron ore, metals, and other commodities, as well as a small amount of food and agricultural products. At the same time, China exports a range of machinery and transportation equipment, communications equipment, and electronics to African countries. In 2009, China surpassed the United States as Africa's largest trade partner (WSJ). According to the Chinese Ministry of Commerce, Sino-African trade reached $126.9 billion for 2010, while the trade volume between China and Africa rose 30 percent year-on-year during the first three quarters of 2011, signaling a new record high (ChinaDaily). China's top five African trading partners (CapitalWeek) are Angola, South Africa, Sudan, Nigeria, and Egypt.
China has taken a two-pronged approach in its economic relations with Africa, American University's Deborah Brautigam wrote at ForeignAffairs.com in January 2010. It has offered resource-backed development loans to oil and mineral-rich nations like Angola, and developed special trade and economic cooperation zones in several states, including Nigeria, Ethiopia, and Zambia. Special economic zones, Brautigam argues, allow African countries to "improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area."
The Chinese Approach to Securing Africa's Oil
China has pursued exploration and production deals in smaller, low-visibility countries, such as Gabon, while also targeting Africa's largest oil producers--with whom the United States and Europe have longstanding relationships--by offering integrated aid packages.
In Angola, Africa's largest exporter of oil to China, oil deals "are characterized by loans and credit lines in connection with infrastructure projects," writes Shelly Zhao for China Briefing magazine. A series of credit lines and loans since 2004 has included funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices; lay a fiber-optic network; and train Angolan telecommunications workers. According to a Center for Strategic and International Studies paper (PDF), in September 2007 the Export-Import Bank of China extended a $2 billion oil-backed loan for a series of projects in Angola, including the construction of new schools and hospitals, as well as the development of the country's energy and water sectors.
"An economic approach focusing on enlarging its commercial interests is the driving factor for China's engagement with petroleum producing states." – Fanie Herman and Tsai Ming-Yen
China has taken a starkly different approach from that of the West in Africa, argues Howard W. French of Columbia University in a May 2010 Atlantic article. "It has focused on trade and commercially justified investment, rather than aid grants and heavily subsidized loans," he writes. French adds that unlike the West, China" has declined to tell African governments how they should run their countries, or to make its investments contingent on government reform. "
China's State and Business Goals in Africa
Some experts suggest that the need to secure natural resources--whether oil, metal, or timber--is the driving component behind China's foreign policy toward Africa. China's manufacturing sector has created enormous demand for aluminum, copper, nickel, iron ore, and oil. As this trend was under way in 2005, David Zweig and Bi Jianhai wrote in Foreign Affairs that China "has been able to adapt its foreign policy to its domestic development strategy" to an unprecedented level by encouraging state-controlled companies to seek out exploration and supply contracts with commodity-producing countries. At the same time, Beijing aggressively courts the governments of those countries with diplomacy, trade deals, debt forgiveness, and aid packages.
Yet some analysts and U.S. policymakers caution against conflating China's foreign policy goals with the actions of its energy firms. In a June 2008 Congressional testimony, the deputy assistant secretaries of state for East Asia and Africa noted, "There are often exaggerated charges that Chinese firms' activities or investment decisions are coordinated by the Chinese government as some sort of strategic gambit in the high-stakes game of global energy security. In reality, Chinese firms compete for profitable projects not only with more technologically and politically savvy international firms, but also with each other."
China's national oil companies are, in some cases, politically stronger than the government agencies charged with regulating them. In a 2007 Washington Quarterly article, Bates Gill and James Reilly refer to this conflict as a "classic principal-agent dilemma" (PDF), noting that China's oversight agencies--including the Ministry of Foreign Affairs and the Ministry of Commerce--do not have authority over Chinese corporations overseas.
At the same time, local African workers increasingly fault Chinese companies for maintaining unfair labor practices, says Ian Taylor, a professor of African politics at the Scotland-based University of St. Andrews. Beijing has "less and less" ability to control these companies, he explains, thus undermining China's official foreign policy rhetoric in Africa of a "win-win" situation for both sides.
Policy of Noninterference
Since former Chinese president Jiang Zemin inaugurated China's reengagement with Africa in 1996, the Chinese have tried to maintain a policy of "noninterference" in the domestic affairs of African countries, explains Donald L. Sparks in an April 2011 paper for the Journal of African Studies and Development.
In an August 2011 paper in the African Journal of Political Science and International Relations, Fanie Herman and Tsai Ming-Yen compare China's foreign policy in Africa to that of the United States. "The U.S. focuses on humanitarianism, good governance, and democratization of petroleum-producing states in their oil diplomacy approach," they write. On the other hand, they argue, "China, the world's fastest growing economy, views SSA [sub-Saharan Africa] as a welcome offloading ground for its products in exchange for oil. An economic approach focusing on enlarging its commercial interests is the driving factor for China's engagement with petroleum producing states."
Moreover, argues Richard Dowden in his 2009 book Africa: Altered States, Ordinary Miracles, the policy of noninterference has freed up China to sell weapons to rogue states like Sudan and Zimbabwe. "When the Sudanese government forcibly removed thousands of people from their land at Merowe so that the Chinese could build a dam on the Nile in exchange for oil concessions," Dowden writes, "Beijing said it was none of its business."
China's policy of noninterference has been most controversial--and challenged--in its policy toward Sudan. In 2007, China altered its policy of blocking UN Security Council resolutions that authorized peacekeeping troops for the contested Sudanese region of Darfur, and subsequently placed modest pressure on Khartoum to allow a deployment of UN forces.
"The fundamental problem facing Africa is governance--it doesn't matter how many roads or ports." – Ian Taylor
China's policy of noninterference in Sudan was further complicated when South Sudan seceded from Sudan (NYT) in July 2011. Prior to South Sudan's independence, China had supported--mainly through the selling of arms--the Khartoum government's efforts to crush a longtime rebel uprising in the south. However, with most of the area's oil located in what is now South Sudan, China has had to recalibrate its policy toward the southern Sudanese rebels. It has since become the main negotiator in an oil dispute between the two Sudans. However, China's new diplomatic role--and traditional alliance with Khartoum--was challenged in January 2012 when rebels loyal to South Sudan kidnapped twenty-nine Chinese workers (WSJ) in the state of South Kordofan in Sudan.
Assessing the Benefits of Sino-African Ties
Chinese investment in Africa has helped spur consistently high economic growth. The International Monetary Fund's October 2011 Regional Economic Outlook for Sub-Saharan Africa (PDF) estimates growth of 5.3 percent and 5.8 percent for 2011 and 2012, respectively.
Some analysts say China's efforts in Africa--from building infrastructure to forgiving billions in debt to providing medical support--are for building goodwill for later investment opportunities or stockpiling international support for contentious political issues. Dowden writes in his book, "China is playing a long game for oil and other raw materials in Africa and securing allies who will vote for it in the United Nations." Meanwhile, St. Andrews' Taylor says, "The fundamental problem facing Africa is governance--it doesn't matter how many roads or ports."
In addition to international observers, many Africans themselves have expressed frustration over China's role on the continent, having accused Chinese companies of underbidding local firms and not hiring Africans. At the same time, Chinese companies that do hire African workers have been criticized for failing to maintain fair labor relations. In Zambia, managers of Chinese mining companies have banned union activity, and in at least two instances, have been charged with attempted murder after opening fire on African employees protesting poor working conditions (Atlantic). In September 2011, Michael Sata won Zambia's presidency largely by tapping into anti-Chinese resentment. He has called on foreign investors to "abide by Zambia's labor laws" (CSM).
International observers say China's willingness to pay bribes--as documented by Transparency International's 2011 Bribe Payers Index report--and to attach few prerequisites for aid undermines both local and international efforts to implement good governance and macroeconomic reforms.
China's engagement in Africa has also raised concerns in Washington, as some recent diplomatic cables leaked in December 2010 by the whistle-blowing website WikiLeaks show. A U.S. diplomatic cable, as reported by the Guardian, noted that if oil or gas is found in Kenya, China's engagement with that country would likely grow. "Kenya's leadership may be tempted to move ever closer to China in an effort to shield itself from Western, and principally U.S., pressure to reform," the memo said. A separate U.S. cable from Nigeria (Guardian) described China as "a very aggressive and pernicious economic competitor with no morals."
Accusations over China's exploitative behavior in Africa have prompted questions about the future of the relationship. French raises one such question in the Atlantic: "Can Chinese money and ambition succeed where Western engagement has manifestly failed?" Or, he asks, "will China become the latest in a series of colonial and neocolonial powers in Africa, destined like others to leave its own legacy of bitterness and disappointment?"

Africa and the BRICS formation

by IndepthAfrica | Posted on Thursday, April 19th, 2012

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The BRICS leaders have seen concretely that there is no alternative to moving from a unipolar world to a multipolar world that is based on mutual respect and an end to hierarchies.
eme, 'BRICS Partnership for Global Stability, Security and Prosperity.' From the press reports coming out India, we have learnt that the leaders of Brazil, Russia India, China and South Africa signed two pacts to stimulate trade in their local currencies and agreed on a joint working group to set up a South-South Development Bank that will raise their economic weight globally.
The participating banks for this new international financial struggle include the Export Import Bank of India, Banco Nacional de Desenvolimento Economico e Social (BNDES) of Brazil, State Corporation Bank for Development and Foreign Economic Affairs of Russia, China Development Bank and Development Bank of South Africa. At the end of the meeting the five leaders issued the 50 point Delhi Declaration declaring their intention to further strengthen "our partnership for common development and take our cooperation forward on the basis of openness, solidarity, mutual understanding and trust." [1]
In our commentary this week we reflect on the seismic changes in the global economy and the reality that Europe has suffered so much from the capitalist crisis that the major capitalist corporations are making preparations for the collapse of the Euro. [2] With each passing day there are reports in the financial press that 'investors are taking huge sums out of eurozone bonds. [3] Where the BRIC leaders had started a formation to facilitate their expanded trading relationships, the collapse of the dollar zone and the Eurozone has accelerated so fast that the policy makers are now improvising without a clear road map as to a project of real international solidarity. To their credit, the BRICS leaders have seen concretely that there is no alternative to moving from a unipolar world to a multipolar world in the 21st Century that is based on mutual respect and an end to hierarchies. Yet, as we will argue in this extended commentary, the focus of the planning of the peoples of the South should no longer be on the basis of bargaining for better terms with western capitalist states. We will maintain that for genuine social and economic transformations to take place in these countries representing 45 per cent of the world's population, it will be necessary to make a clean break with the ideas of 'historic capitalism.' [4] Whether the BRICS formation will be the embryo of a 'new wave of independent initiatives from the South' or based on regional hegemons will be dependent on the extent to which the forces of social justice and emancipation engage the political and ideological struggles around BRICS. A 17 point action plan focused on issues relating to finance, health, population, food security and multilateral energy cooperation within the BRIC's framework provides spaces for a new research and policy agenda that could strengthen and consolidate the goals of a new framework for economic cooperation. In this way progressive scholars can give meaning to the call for the expansion of the channels of communication, exchanges and people-to-people contact amongst the BRICS, including in the areas of youth, education, culture, tourism and sports. [5]
The current leaders of India aspire for a BRICS and the 'development bank' to be an auxiliary institution of the World Bank. Inside South America, Brazil is the society that is represented as a rising major power but the African descendants and the indigenous peoples in that society are involved in a major struggle for reparative justice. Temporarily, South Africa carries the torch for Africa within BRICS but we will analyze the limitations of this present arrangement arguing that the strength of BRICS will be realized in a context when new international formations such as BRICS have the full weight of African representation from a united peoples of Africa and a Brazil that is democratized to reflect the political representation of the majority of the Brazilian population. Ultimately, for BRICS to be a real alternative it will have to have a clear strategy about expansion so that the goals of building another world based on peace and real international solidarity can be realized.
When the financial analysts at Goldman Sachs wrote their forecasts on the future of the BRIC economics in 2003, "Dreaming With BRICs: The Path to 2050," [6] it was not in their calculation that in less than ten years the capitalist system would be in deep crisis and that the societies of the European Union would be on their knees with emissaries seeking bailout from China, Brazil and even African states. At the time of the 2012 Summit the New York Times grudgingly reported that, "Last November, Mr. O'Neill predicted that the group's combined economies, now worth almost $13 trillion, would double in the coming decade, eventually surpassing the size of the economies of both the United States and the European Union." [7] Opportunistically, the leaders of Britain are jockeying for London to be an offshore center for trade in the Chinese currency. With the news of the collapse of the Euro spooking the bond traders in Europe, a few days ago the bank HSBC announced that it was about to sell bonds denominated in the Chinese Currency (RMB or Yuan). European capitalists from the London capital markets are no longer waiting for a neat change in the property laws inside of China which would guarantee holding large amounts of Chinese currencies and assets.
Today, the reality of a changed international system is evident and policy makers in all parts of the world are seeking to adjust to this new reality. Out of a force of habit from the past hundred years European and US policy makers seek to shape perceptions of the 'emerging countries' [8] and it is from their schools where there are scholars who pontificate on which society will be the hegemons in the next fifty years.
Students who start from realist theories in international relations have studied ideas of strength and power for so long that in their analysis and calculation, there can be no other possibility than a world where there is one or two military 'superpowers.' Whether it is Henry Kissinger who in his book, 'On China,' envisages the dominance of China, (as long as it takes the capitalist path) or Zbigniew Brzezinski who envisage a new alliance between China and the United States in a Group of Two (so that the present Chinese political leadership can deepen their alliance with the plutocrats of Wall Street), realism and realist doctrines echo across the globe. From the United Kingdom, British scholars and journalists pontificate on the rise of China arguing that China's economic and political clout will only be realized when China embrace western 'democratic' values. [9] Robert Kaplan completes this realist tapestry by writing on the rivalry between China and the United States in the Indian Ocean. [10] From inside Chinese Universities and think tanks leading realist scholars such as Professor Yan Xuetong of Tsinghua University and Wang Yizhou, Vice Dean School of International Studies at Peking University ponder on the need for the Rise of China in order to end the dominance of United States or the U.S.-led world order." These Chinese institutions now produce books and monographs on the Rise of China and fete scholars who write books such as that of Martin Jacques, When China Rules the World: The End of the Western World and the Birth of a New Global Order. [11]
When I attended the 11th annual conference on Chinese diplomacy in Beijing last December, it was striking how much emphasis the realists were placing on the future relationship with the United States as if there were no other important regional formations. It was left to by Le Yucheng, Assistant Minister and Director Policy Planning, Ministry of Foreign Affairs to highlight the new importance of BRICS for Chinese foreign policy. In his keynote address "Current International Situation and China's Foreign Affairs" le Yucheng grasped the importance of BRICS and communicated this, especially in the context of financial crisis in Europe, the revolutionary change in Egypt and the diminution of the dollar. Thus far, because of the intellectual and political retreat from Marxism and Maoism in China, the political leaders have been supporting the ideas of Confucius, "that everyone should know their place in social hierarchies." Many of the top intellectuals within the political establishment of China who seek to trace their lineage to their proper place in the social hierarchy of China prior to 1949 do not factor in the international crisis of capitalism in their analysis of the new global order.
It is in India where the perverse idea of social hierarchy has been institutionalized in a caste system to the point where these ideas hold back the full potential of all of the peoples of India. Realist scholars in India respond to the end of the US dominance by holding on to a vision where the ideas and policies of the United States can form the basis for an alliance between the Indian ruling class and the United States to 'balance' the rise of China. Although touted as a 'rising economy,' India has been the largest recipient of World Bank loans. This alliance between the Indian governing class and the Bretton Woods Institutions ensured that in his address to the BRICS Summit, the Prime Minister of India, Manmohan Singh said that, BRICS need to "expand the capital base of the World Bank and other Multilateral Development Banks to enable these institutions to perform their appropriate role in financing infrastructure development." [12] There is a wider intellectual canvas in India with younger scholars recognizing the need to go beyond neo-realism in international affairs. There are major political and social struggles all over India with some of these struggles militarized. Scholars such as Sreeram Chaulia have written on need for the refinement of theories relating to South-South Cooperation. In the dominant centers of International Relations theories there is great fear of theoretical frameworks that start from a radical feminist perspective.
Russia has retreated from all ideas of building an egalitarian society and is now suspended between its socialist past and its oligarchic present. Russia is already in a formation with China called the Shanghai Cooperation Organization (SCO) and recently carried out joint military operations with China. Russia is one of the societies which is still reeling from destructive dismantling of the planned economy. [13] while in Brazil the intellectual struggles are as intense as the political struggles for democratization for that society to break out of racial hierarchies. Russian scholars have been very active in calling for a clear role for BRIC in articulating the construction of a new international order. [14] In the emerging global order, the majority of the peoples of the South are seeking new relations beyond the reproduction on new 'superpowers.' [15] Inside Brazil, the majority of the peoples are struggling for a form of democratization that repairs the centuries of destruction and genocidal economics. Foremost among these peoples are those of African descent at home and abroad who are seeking to move to a new philosophical basis for international politics, one that harnesses the resources of the planet to lay the foundations for peaceful relations. It is here where the philosophy of Ubuntu holds promise in proposing a different priority from the old ideas of strength, power, military might and the 'development of the productive forces.'
In 2011 South Africa was invited by China to its summit on the Chinese island of Hainan and South Africa became the fifth member of BRIC. When South Africa became the full member there were a number of choices before the South Africans, either reproducing realist ideas that South Africa was the strongest economy in Africa, a regional hegemon and hence logically entered the club of the 'emerging powers' or pushing for BRICS to engage questions of peace, health and the environment to break the preoccupation with 'trade and development' It was the South African struggle that popularized the ideas of Ubuntu but since the coming to power of the African National Congress (ANC), the political leaders have embraced the ideas of capitalist development while posturing as defenders of African freedom. The memory of the self-organization of the popular classes in the anti-apartheid struggle is still fresh in the minds of the people so the political leadership cannot jettison the ideas of African liberation. More importantly, it was this anti-apartheid struggle that gave birth to new forms of internationalism.
Thus, while progressive Pan Africanists hail the emergence of BRICS as a possible alternative to neo-liberal hegemony, the planet will not have shaken the shackles of oppression by opposing US financial dominance and replacing it with multilateral neo-liberal cooperation between rising capitalist states in Brazil, Russia, India, China and South Africa. The progressive African point of view on the emergence of BRICS is now being demanded as more and more there are initiatives coming from BRICS such as the formation of a development bank.
Vladimir Shubin, Institute for African Studies, Russian Academy of Sciences (one of the intellectual holdovers from the era of socialist solidarity) has been one of the more engaging scholars from the BRIC countries who has shed some light on the thinking behind the leaders of BRIC in their invitation to the South Africans to become a member of BRIC. In his paper "BRIC or BRICS," Shubin, a leading authority on the relationship between Russia and the liberation movements in Africa, wrote of South Africa's aspiration to be part of a 'core of nonwestern powers.' [16] Shubin's writings are useful in so far as we are exposed to some of the thinking outside of western Europe on the evolution BRICS and the overlapping relations of the IBSA Dialogue Forum. During the height of the struggles over intellectual property rights in the World Trade Organization (WTO) and the future of generic medicines, India, Brazil and South Africa (IBSA) had established the IBSA forum as a platform to engage in discussions for cooperation in the fields of agriculture, trade, culture, and defence among others. One of the top priorities of IBSA was for the democratization of the Security Council of the United Nations and for the end to the veto power of the five permanent members. These three states had an interest in becoming permanent members of the Security Council displacing France and Britain. Neither China nor Russia is enthusiastic about the democratization of the Security Council of the United Nations.
South Africa's ability to exercise any real leadership within IBSA was circumscribed by the proclamation of the New Partnership for Africa's Development (NEPAD) strategy for Africa's economic transformation. Numerous African scholars have written extensively on how World Bank 'development' ideas were at the foundation of this NEPAD. [17] These critiques of NEPAD and the Millennium Development Goals (MDG) are instructive in so far as the leaders of the BRICS formation continue to maintain that the outmoded MDG goals "remain a fundamental milestone in the development agenda." For the past ten years NEPAD was another foreign policy instrument for South African capital. Throughout Africa imperial economists have been able to recruit African technocrats who have been as energetic as the Bretton Woods institutions in promoting 'economic structural adjustment programmes.' These liberalization projects have been labeled as 'economic terrorism.' This economic terror has taken the form of a sustained attack on the living standards of the African peoples and the clear deterioration of the quality of life that has brought into being a new political consciousness in Africa. In all parts of Africa citizens have to do with little or no access to the basic necessities of clean water, health care, decent education and housing. Neo-liberalism and structural adjustment strengthened the alliance between the African ruling classes and the imperial overlords so that IMF and World Bank fundamentalism ensured that the profitability of enterprises took pride of place before human lives.
African governments have embraced neo-liberal exploitation without the direct involvement of the international financial institutions' such as the IMF and the World Bank. In this way, leaders in societies such as India and the majority of African states will continue to serve the interests of global capitalism. Globalization gave unprecedented mobility for the lords of finance so they were not worried about national boundaries. What was most important was that 'development' serves the interest of the one per cent. This would include reproducing one per centers in the BRICS societies. In the discourse of the financial barons, 'development' was supposed to be in the hands of experts and should exclude the skills, consciousness and capabilities of the producing classes. This kind of 'development' (according to the Walt Rostow model) was for the demobilization and depoliticization of the people who fought for independence.
Time was not standing still and by 2008 when the full blown capitalist crisis exploded, then there were new initiatives to create other international formations. It was just after the crash of Wall Street in 2008 when the first official multilateral conference of Brazil, Russia, India and China met in June 2009 in the Russian City of Yekaterinburg. Previously, in 2006 the foreign ministers of the four countries had met unofficially in the city of New York, followed by a meeting at diplomatic level in Yekaterinburg in May 2008. The declared objective of the first summit of BRIC was spelt out by the Russian President Dmitry Medvedev who said: "The BRIC summit aims to create the conditions for the building of a fairer world order and the creation of a favourable environment for resolution of global problems. At the same time, we must not overlook our national problems and objectives, which are priorities for all of us, of course, priorities for all the respective leaders and governments" [18] One could see from the declaration that there had not been much thought given to what would constitute a 'fairer' world order.
The second summit of BRIC was held in Brasilia, Brazil in 2010 where the same 'reform' agenda echoed as the final communique. The leaders called for reforming financial institutions. It was in the context of the flurry of meetings of the G20 meeting in 2010 in Seoul, South Korea when South Africa was formally invited by the Chinese to attend the third summit of BRIC which was to be held on the Chinese Island of Hainan in April 2011. This summit took place at the height of the NATO bombing of Libya but apart from the statements of condemnation in the communique there were no strong pressures to rally the international community against the manipulation of the Resolutions of the Security Council of the United Nations on responsibility to protect. The Chinese and the Russians took cover from making any grand statement by arguing that South Africa had voted to support the UN resolution while the two permanent members had abstained.
The final communique from the SANYA, Hainan meeting declared,
"Leaders of the five fast-growing emerging economies vowed to support the reform and improvement in international monetary system for the establishment of a stable, reliable and broad-based international reserve currency system.
"The international financial crisis has exposed the inadequacies and deficiencies of the existing international monetary and financial system." [19]
This declaration was being overtaken by the collapse of the old financial architecture. Before the end of 2011, the importance of BRICS as an alternative international formation was manifest by legations from the European Union travelling to China and Brazil seeking bailout for the Euro. The collapse of the European alternative to the dollar narrowed the choices before the countries of BRICS and it is this reality that should shed light on the call for BRICS to establish a development Bank at the end of the fourth summit in New Delhi.
The focus on financial relations and on creating new basis for economic relations overshadowed the burning international questions of the drumbeats of war in the Persian Gulf and the continued build-up of US military presence in Asia-Pacific and in Africa. We do not know if the leaders of BRICS discussed the question of the aftermath of Libya because Libya was not mentioned in the press reports. It was from Cuba in the last year where in a conference with intellectuals Fidel Castro was in a discussion where it was said that in all parts of the world those who want peace must discuss Libya. In particular, it was discussed that there should be international opposition to the killing of Africans in their own country and calling them mercenaries as is the case for the township of Tawerga. [20]
We do know that during the last year Russia attempted to reconvene the UN Security Council to discuss the killing of innocent Africans who were deemed to be 'African' mercenaries in an African country. Collectively, the leaders of BRICS do not support the bellicose postures toward Iran and these leaders understand the long term goals of Israel and the militaristic wing of US capital. This was manifest in a strong and forthright statement that,
"The situation concerning Iran cannot be allowed to escalate into conflict, the disastrous consequences of which will be in no one's interest. Iran has a crucial role to play for the peaceful development and prosperity of a region of high political and economic relevance, and we look to it to play its part as a responsible member of the global community. We are concerned about the situation that is emerging around Iran's nuclear issue. We recognize Iran's right to peaceful uses of nuclear energy consistent with its international obligations, and support resolution of the issues involved through political and diplomatic means and dialogue between the parties concerned, including between the IAEA and Iran and in accordance with the provisions of the relevant UN Security Council Resolutions."
Where the final communique of the fourth BRICS summit was short on recommendations for a clear statement on the 'colossal failure of NATO in Libya, it was robust in the call for a new development bank. The objective of the BRICS bank will be to scale up intra-Brics trade which has been growing at the rate of 28 per cent over the last few years. We are informed in a missive from New Delhi that, "Brics sign 2 currency pacts."
This article informed us that at US$230 billion, interBrics remains much below the potential of the five economic powerhouses. Brics has set a target of interBrics trade to be US$500 billion by 2015. For this purpose there was the directive for the setting up of a BRICS Development bank. The BRICS Delhi Declaration said that, "The bank is being envisaged to mobilise "resources for infrastructure and sustainable development projects in Brics and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development." The leaders directed their finance ministers "to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us by the next summit", said the declaration.
This move to develop a complimentary institution to supplement the existing efforts to the International Monetary Fund and the World Bank contains all of the contradictions inherent in the ideation system of those who want to catch up and surpass the West. Progressive Pan Africanists yearn for the weakening of the financial hegemony of imperialist states of the Anglo-American world and are searching for levers to break the stranglehold of the Washington Consensus. In every part of Africa there is awareness that there is need for massive infrastructural investment (roads, rail, ports, Information and Telecommunications, air transport, energy and power generation, canals and water management) that will strengthen inter African trade and break the deformed patterns of extraction of resources. However, Africans will be vigilant to ensure that the 'development' plans of BRICS do not reproduce the five decades of 'development' that Africa has witnessed since independence.
The Indian Prime Minister was explicit about the kind of development that he had in mind when in his speech he argued that the BRICS development Bank will be a supplementary institution to the World Bank. Progressive grassroots movements and intellectuals in the global South have been explicit in calling for an alternative to the priorities of the World Bank. Already, the Export Import Bank of China and the China Development Bank spends more money in the developing world than the World Bank. The Financial Times reported that in 2009 China spent over US $108. Billion while the World Bank spent US $100.3 b. This shift in the source of development funds is most explicit in Africa where according to information from the Exim bank of China, in the last year China invested more than US $35b in Africa. What must change are the priorities of these investments.
Dr Sreeram Chaulia, a leading Indian scholar of International Relations gave some indication of the thinking in India that went into the proposal for a development bank. Chaulia in arguing that the World Bank and the IMF have outlived their usefulness suggested that the new Development Bank of BRICS should be patterned after the Bank of the South that has been explicit in its opposition to 'development' plans based on neo-liberal ideas. Chaulia argued that,
"The concept of an intergovernmental bank paralleling or opposing the World Bank and operating on different ideological and procedural bases is not novel, as there is already a 'Bank of the South' (Banco del Sur) in existence in Latin America. It is a monetary and lending organisation with seven member countries, including Brazil, and a modest seed capital of $20 billion. Its mere presence has carved an autonomous space. India's motive and selling point in advancing the proposal for a Brics bank is, likewise, that the Bretton Woods institutions have historically failed to meet the developmental requirements of the Global South and that alternatives can now be erected on the shoulders of rising powers within the South, which have accumulated vast capital reserves. It would be a financial revolution if the proposed Brics bank is integrated with the Bank of the South in Latin America through the common bridge of Brazil. Brics must avoid dangling the threat of launching a new bank only to win some more representation within the World Bank and the IMF. The Brics bank must not become a mere bargaining ploy which could be shelved if more voting rights were given to the five emerging economies in western-led international financial institutions. A bank for the entire Global South should be non-negotiable, so that Least Developed Countries (LDC) keep faith in emerging powers who are growing at a much faster rate." [21]
I have quoted Chaulia extensively because I agree that the formation of BRICS must not become a bargaining ploy for Chinese and Indian leaders to better their relationship with western financial capitalists. From the experiences of NEPAD and the Development Bank of South Africa (DBSA), African progressives can have no confidence in the present political leaders in South Africa to promote an agenda which is for the benefit of Africans in general and not South African capitalists. It is here where it is imperative that progressive and patriotic Africans work harder for the full harmonization of economic relations within the African Union so that the future of BRICS will be anchored in an international environment where the African representation in BRICS will be on behalf of Africa as a whole.
The struggles to make the 'investments' of BRICS more accountable must be engaged within South Africa so that the neo-liberal priorities of the present government must be reversed. Thus, in the short run, while South Africa carries the banner of Africa within BRICS, the political leadership in South Africa must be held accountable so that the investment strategies do not replicate the destructive investments that have been championed by the South Africans with the World Bank. The financing of the coal fired plant in South Africa is but one example of the need for a wider discussion on the investment strategies of the future BRICS bank. Africa should not be a dumping ground for old technologies that are destroying the environment. France is busy seeking to align with China to sell nuclear reactors to South Africa.
In a recent book, To Cook a Continent, African scholars have been warning about the dangers and consequences of the destructive forms of extraction of resources from Africa. The proposed BRICS bank will be put on notice that Africans will be vigilant to see that Chinese, Russia, Brazilian and Indian conglomerates operate in ways that respect Africans as humans. African workers are organizing against capitalists from BRICS that seek to reproduce low wage environments with the absence of the rights of workers. Africans will not replace plunder from western capitalists by new extractive capitalists from the East and from Brazil. Importantly, African progressives will not support another financial institution that facilitate capital flight from Africa. BRICS can move decisively to ensure that it is committed to the principle of the return of stolen assets and reparations.
The African peoples have a clear sense of the need for a new Development Bank to supplant the IMF but this financial institution cannot be based on the ideas of Walt Rostow or Henry Kissinger. Samir Amin was very clear as to the new kind of social transformation that must be in tandem with this 'development.'
"Development cannot be reduced to its apparently major economic dimension- the growth of GNP and the expansion of markets(both exports and internal markets)- even when it takes into consideration the 'social' dimensions (degrees of inequality in the distribution of income, access to public services like education and health). 'Development' is an overall process that involves the definition of political objectives and how they are articulated: democratization of society and emancipation of individuals, affirmation of the power and autonomy of the nation in the world system." [22]
This was the principle of development and social progress as it was articulated by the Bandung project. Imperialism fought to roll back this project of the autonomy of societies and nations in the world system. It was in Africa where this counter revolutionary energy was fed by white supremacy so Africans will strategize for the building of a new international system. This system cannot be based on a Confucian principle of hierarchies or an Indian caste system. In the medium term, if BRICS is to be the anchor of a new social order, it must have a strategy for a phased expansion.
Africans will support BRICS while they are fighting against oppression at home and abroad. Africans welcome the idea of linking up with the bank of the South in so far as it is in Latin America where the struggles against neo-liberalism and racism are most advanced. In Argentina the radical initiatives in relation to an assertive role of the Central bank and the nationalizing of foreign oil companies is now making headlines. The struggles of African descendants in Latin America have brought issues of racism and racial discrimination out in the open. It is in Brazil where the African descendants constitute the majority of the population where this struggle is most intense. The fight against racism in Brazil is going on at the same time when Africans are working hard to strengthen the African Union. It is the convergence of these two struggles which will influence the outcome of Dreaming with BRICS the path to 2050. In this way the future of BRICS will be linked to a multipolar world that is against all forms of oppression. This would expose the caste systems of Russia, China and India and be pushed by the same alliance that promoted Ubuntu in the African Liberation struggles.
Ubuntu emphasizes linked humanity and our intrinsic connection with a complex universe. The processes of 'development that we have seen over the past thirty years have reinforced the forms of production and consumption that is speeding the destruction of the planet earth. Although in the communique the leaders of BRICS affirmed the concept of a 'green economy,' the language of 'sustainable development' and 'economic growth' point to the old forms of economic industrialization that has brought the world to a tipping point. The carrying capacity of the planet cannot sustain a mode of capitalist economic development that mimics the forms of human organization of Western Europe and North America. China and India argue that they are developing countries in fora that deals with climate change but want to continue the destructive forms of economic management. Ubuntu opens the space for us to understand how different parts of the universe fit together, with an understanding that "everything is connected to everything else." As temporary inhabitants of the physical space on earth, we begin to appreciate the reality that the biosphere is the global ecological system integrating all living beings and their relationships, including their interaction with the elements of the cooperating systems (atmosphere, geosphere, and hydrosphere).
We are entering the era of the bio-economy and the idea of a BRICS development bank must have as its first priority the health and safety of the planet and the health and safety of humans everywhere.
Horace Campbell is Professor of African American Studies and Political Science at Syracuse University.
[1] Fourth BRICS Summit – Delhi Declaration, Ministry of Foreign Affairs, India, March 29, 2012
[2] Andrea Felsted, "Companies make plans in case the euro collapses", in Risk Management, Financial Times Special Report, April 16 2012, p.2.
[3] David Oakley, "Investors taking huge sums out of eurozone bonds", Financial Times, April 17 2012, p.21
[4] Samir Amin discusses the challenges of ending historic capitalism in the book, Ending the Crisis of Capitalism or Ending Capitalism? Pambazuka Books, Oxford, 2011
[5] Delhi Declaration, No.49
[6] Goldman Sachs, 2001. Dreaming With BRICs: The Path to 2050. London,
[7] Jim Yardley, "For Group of 5 Nations, Acronym Is Easy, but Common Ground Is Hard"
[8] Roberts, Cynthia. 2011. Building the New World Order BRIC by BRIC. The European Financial Review, Spring issue, pp.4-8.
[9] Jonathan Fenby, Tiger Head, Snake Tails: China today, how it got there and where it is heading, Simon & Schuster, New York 2012. This line of argument is reproduced by Will Hutton, The Writing on the Wall: China and the West in the 21st Century, Little, Brown & Company, New York 2007
[10] Robert Kaplan, "South Asia's Geography of Conflict, Council For Foreign Relations," New York, September 2011
[11] Martin Jacques, When China Rules the World: The End of the Western World and the Birth of a New Global Order, Penguin Press, 2012
[12] http://pmindia.nic.in/content_print.php?nodeid=1156&nodetype=2
[13] Kotz, David M, "Russia's Financial Crisis: The Failure of Neoliberalism?" Z Magazine, January, 1999, 28-32., See also David Harvey, The New Imperialism, Clarendon Press Oxford, 2003
[14] Davydov, Vladimir. 2008. The Role of Brazil, Russia, India & China (BRIC) In the Construction Of the International Order. Megatrend Review, vol.5, (1), pp.85-97.
[15] Brazil As an Economic Superpower?: Understanding Brazil's Changing Role in the Global Economy, edited by Leonardo Martinez – Diaz and Lael Brainard, Brookings Institute, Washington 2009
[16] Vladimir Shubin, "BRIC or BRICS?" Paper presented at the Nordic Institute of African Studies, 2011
[17] There have been well developed critiques of NEPAD by scholars within Africa. See J.O. Adesina," NEPAD and the Challenge of Africa's Development: Towards the Political Economy of a Discourse," African Journal of International Affairs, Volume 1 No.2, 2001. See also Samir Amin, "The Millennium Development Goals: A Critique from the South," Monthly Review, Volume 57, Issue 10, 2006
[18] See Speech by the Russian President DMITRY MEDVEDEV at the BRIC summit, June 16, 2009
[19] China Daily, BRICS leaders issue Sanya Declaration, (Xinhua), April 14, 2011
[20] Fidel Castro Talk with Intellectuals: Our Duty is to struggle.
[21] Sreeram Chaulia, "Better coordination needed among Brics nations on international political issues," Economic Times, March 21, 2012
[22] Samir Amin, Ending the Crisis of capitalism or Ending Capitalism? Pambazuka Press, 2011, Page 131


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A sightseeing ship on the Huangpu River against the night skyline of Pudongs Lujiazui Financial District on April 15, 2010 in Shanghai, China. China is one of five countries known as BRICS.

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Definition: BRIC is an acronym that refers to the economies of Brazil, Russia, India, and China, which are seen as major developing economies in the world. According to Forbes, "The general consensus is that the term was first prominently used in a Goldman Sachs report from 2003, which speculated that by 2050 these four economies would be wealthier than most of the current major economic powers."
In March 2012, South Africa appeared to join BRIC, which thus became BRICS. At that time, Brazil, Russia, India, China and South Africa met in India to discuss the formation of a development bank to pool resources. At that point, the BRIC countries were responsible for about 18% of the world's Gross Domestic Product and were home to 40% of the earth's population. It would appear that Mexico (part of BRIMC) and South Korea (part of BRICK) was not included in the discussion.
Pronunciation: Brick
Also Known As: BRIMC - Brazil, Russia, India, Mexico, and China.
Alternate Spellings: BRIC, BRICS, BRIMC, BRIMCS (?)
The BRICS countries include more than 40% of the world's population and occupy over a quarter of the world's land area. Brazil, Russia, India, China, and South Africa together are a powerful economic force.


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Brazil, Russia, India, China
Map of BRIC countries

Federative Republic of Brazil
President (head of state and government): Dilma Rousseff
Russian Federation
President (head of state): Vladimir Putin
Prime Minister (head of government): Dmitry Medvedev
Republic of India
President (head of state): Pranab Mukherjee
Prime Minister (head of government): Manmohan Singh
People's Republic of China
President (head of state): Hu Jintao
Premier (head of government): Wen Jiabao

In economics, BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development. It is typically rendered as "the BRICs" or "the BRIC countries" or "the BRIC economies" or alternatively as the "Big Four".
The acronym was coined by Jim O'Neill in a 2001 paper entitled "Building Better Global Economic BRICs".[1][2][3] The acronym has come into widespread use as a symbol of the shift in global economic power away from the developed G7 economies towards the developing world. It is estimated that BRIC economies will overtake G7 economies by 2027.[4]
According to a paper published in 2005, Mexico and South Korea were the only other countries comparable to the BRICs, but their economies were excluded initially because they were considered already more developed, as they were already members of the OECD.[5] The same creator of the term "BRICS" coined the term MIKT, that includes Mexico and (South) Korea.
Several of the more developed of the N-11 countries, in particular Turkey, Mexico, Indonesia and Nigeria, are seen as the most likely contenders to the BRICs. Some other developing countries that have not yet reached the N-11 economic level, such as South Africa, aspire to BRIC status. Economists at the Reuters 2011 Investment Outlook Summit, held on 6–7 December 2010, dismissed the notion of South Africa joining BRIC.[6] Jim O'Neill told the summit that he was constantly being lobbied about BRIC status by various countries. He said that South Africa, at a population of under 50 million people, was just too small an economy to join the BRIC ranks.[7] However, after the BRIC countries formed a political organization among themselves, they later expanded to include South Africa, becoming the BRICS.[8]
Goldman Sachs has argued that, since the four BRIC countries are developing rapidly, by 2050 their combined economies could eclipse the combined economies of the current richest countries of the world. These four countries, combined, currently account for more than a quarter of the world's land area and more than 40% of the world's population.[9][10]
Goldman Sachs did not argue that the BRICs would organize themselves into an economic bloc, or a formal trading association, as the European Union has done.[11] However, there are some indications that the "four BRIC countries have been seeking to form a 'political club' or 'alliance'", and thereby converting "their growing economic power into greater geopolitical clout".[12][13] On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg, and issued a declaration calling for the establishment of an equitable, democratic and multipolar world order. Since then they have met in Brasília in 2010, met in Sanya in 2011 and in New Delhi, India in 2012.[14]



[edit] Thesis

Economist Jim O'Neill who proposed the idea of BRIC countries.
São Paulo, Brazil

Shanghai, China
Mumbai, India
Goldman Sachs argues that the economic potential of Brazil, Russia, India and China is such that they could become among the four most dominant economies by the year 2050. The thesis was proposed by Jim O'Neill, global economist at Goldman Sachs.[15] These countries encompass over 25% of the world's land coverage and 40% of the world's population and hold a combined GDP (PPP) of 18.486 trillion dollars. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets.{Incal 2011}
However, it is not the intent of Goldman Sachs to argue that these four countries are a political alliance (such as the European Union) or any formal trading association, like ASEAN. Nevertheless, they have taken steps to increase their political cooperation, mainly as a way of influencing the United States position on major trade accords, or, through the implicit threat of political cooperation, as a way of extracting political concessions from the United States, such as the proposed nuclear cooperation with India.[citation needed]

[edit] (2003) Dreaming with BRICs: The Path to 2050

The BRIC thesis recognizes that Brazil, Russia, India and China[16] have changed their political systems to embrace global capitalism. Goldman Sachs predicts that China and India, respectively, will become the dominant global suppliers of manufactured goods and services, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Of the four countries, Brazil remains the only polity that has the capacity to continue all elements, meaning manufacturing, services, and resource supplying simultaneously. Cooperation is thus hypothesized to be a logical next step among the BRICs because Brazil and Russia together form the logical commodity suppliers.

[edit] (2004) Follow-up report

The Goldman Sachs global economics team released a follow-up report to its initial BRIC study in 2004.[17] The report states that in BRIC nations, the number of people with an annual income over a threshold of $3,000, will double in number within three years and reach 800 million people within a decade. This predicts a massive rise in the size of the middle class in these nations. In 2025, it is calculated that the number of people in BRIC nations earning over $15,000 may reach over 200 million. This indicates that a huge pickup in demand will not be restricted to basic goods but impact higher-priced goods as well. According to the report, first China and then a decade later India will begin to dominate the world economy.
Yet despite the balance of growth, swinging so decisively towards the BRIC economies, the average wealth level of individuals in the more advanced economies will continue to far outstrip the BRIC economic average.
The report also highlights India's great inefficiency in energy use and mentions the dramatic under-representation of these economies in the global capital markets. The report also emphasizes the enormous populations that exist within the BRIC nations, which makes it relatively easy for their aggregate wealth to eclipse the G6, while per-capita income levels remain far below the norm of today's industrialized countries. This phenomenon, too, will affect world markets as multinational corporations will attempt to take advantage of the enormous potential markets in the BRICs by producing, for example, far cheaper automobiles and other manufactured goods affordable to the consumers within the BRICs in lieu of the luxury models that currently bring the most income to automobile manufacturers. India and China have already started making their presence felt in the service and manufacturing sector respectively in the global arena. Developed economies of the world have already taken serious note of this fact.

[edit] (2007) Second Follow-up report

This report compiled by lead authors Tushar Poddar and Eva Yi gives insight into "India's Rising Growth Potential". It reveals updated projection figures attributed to the rising growth trends in India over the last four years. Goldman Sachs assert that "India's influence on the world economy will be bigger and quicker than implied in our previously published BRICs research". They noted significant areas of research and development, and expansion that is happening in the country, which will lead to the prosperity of the growing middle-class.[18]
India has 10 of the 30 fastest-growing urban areas in the world and, based on current trends, we estimate a massive 700 million people will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and services.
In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India's GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043.[18]

[edit] (2010) EM Equity in Two Decades: A Changing Landscape

According to a 2010 report from Goldman Sachs, China might surpass the US in equity market capitalization terms by 2030 and become the single largest equity market in the world.[19] By 2020, America's GDP might be only slightly larger than China's GDP. Together, the four BRICs may account for 41% of the world's market capitalization by 2030, the report said.[20]
In late 2010, China surpassed Japan's GDP for the first time, with China's GDP standing at $5.88 trillion compared to Japan's $5.47 trillion. China thus became the world's second-largest economy after the United States.[21]
Based on a Forbes report released in March 2011, the BRIC countries numbered 301 billionaires among their combined populations, exceeding the number of billionaires in Europe, which stood at 300 in 2011.[22]
According to The National Institute of Economic and Social Research (NIESR) based on International Monetary Fund figures, in 2012 Brazil has become the sixth-biggest economy in the world by overtaking UK with $2.52 trillion and $2.48 trillion, respectively. In 2010, the Brazillian economy was worth $2.09 trillion and UK with $2.25 trillion. Significant increase is caused by Brazillian economic boom on high food and oil prices.[23]
After Standard & Poor's (S&P) cited that India's growth outlook could deteriorate if policymaking and governance don't improve, in June 2012 Fitch Ratings cut its credit outlook to negative from stable with maintained its BBB- rating, the lowest investment grade rating. A week before Fitch released the rating, S&P said India could become the first of the BRIC countries, to lose investment-grade status.[24]

[edit] Statistics

Proportion of world (countries with data) nominal GDP for the countries with the top 10 highest nominal GDP in 2010, from 1980 to 2010 with IMF projections until 2016. Countries marked with an asterisk are non-G8 countries China, Brazil and India. Grey lines show actual US dollar values.[25]
The Economist publishes an annual table of socio-economic national statistics in its Pocket World in Figures.[citation needed] Extrapolating the global rankings from their 2008 Edition for the BRIC countries and economies in relation to various categories provides an interesting touchstone in relation to the economic underpinnings of the BRIC thesis. It also illustrates how, despite their divergent economic bases, the economic indicators are remarkably similar in global rankings between the different economies. It also suggests that, while economic arguments can be made for linking Mexico into the BRIC thesis, the case for including South Korea looks considerably weaker.
A Goldman Sachs paper published later in December 2005 explained why Mexico was not included in the original BRICs.[5]
Categories Brazil Russia India China
Area 005th 001st 007th 003rd
Population 005th 009th 002nd 001st
Population growth rate 107th 221st 090th 156th
Labour force 005th 007th 002nd 001st
GDP (nominal) 007th 011th 09th 002nd
GDP (PPP) 007th 006th 003rd 002nd
GDP (nominal) per capita 055th 054th 137th 095th
GDP (PPP) per capita 071st 051st 127th 093rd
GDP (real) growth rate 015th 088th 005th 006th
Human Development Index 073rd 065th 119th 089th
Exports 018th 09th 014th 001st
Imports 019th 017th 011th 002nd
Current account balance 047th 005th 169th 001st
Received FDI 011th 012th 029th 005th
Foreign exchange reserves 007th 003rd 006th 001st
External debt 028th 024th 026th 023rd
Public debt 047th 122nd 029th 098th
Electricity consumption 009th 004th 003rd 002nd
Renewable energy source 003rd 005th 006th 001st
Number of mobile phones 005th 004th 002nd 001st
Number of internet users 005th 007th 004th 001st
Motor vehicle production 007th 019th 006th 001st
Military expenditures 012th 005th 010th 002nd
Active troops 014th 005th 003rd 001st
Rail network 010th 002nd 004th 003rd
Road network 004th 008th 003rd 002nd
The ten largest economies in the world in 2050, measured in GDP (billions of 2006 USD), according to Goldman Sachs[26]
Gross Domestic Product in 2006 US$ billions[26]
Rank 2050 Country 2050 2045 2040 2035 2030 2025 2020 2015 2010 2006
1 China 70,710 57,310 45,022 34,348 25,610 18,437 12,630 8,133 4,667 2,682
2 United States 38,514 33,904 29,823 26,097 22,817 20,087 17,978 16,194 14,535 13,245
3 India 37,668 25,278 16,510 10,514 6,683 4,316 2,848 1,900 1,256 909
4 Brazil 11,366 8,740 6,631 4,963 3,720 2,831 2,194 1,720 2,087 1,064
5 Mexico 9,340 7,204 5,471 4,102 3,068 2,303 1,742 1,327 1,009 851
6 Russia 8,580 7,420 6,320 5,265 4,265 3,341 2,554 1,900 1,371 982
7 Indonesia 7,010 4,846 3,286 2,192 1,479 1,033 752 562 419 350
8 Japan 6,677 6,300 6,042 5,886 5,814 5,570 5,224 4,861 4,604 4,336
9 United Kingdom 5,133 4,744 4,344 3,937 3,595 3,333 3,101 2,835 2,546 2,310
10 Germany 5,024 4,714 4,388 4,048 3,761 3,631 3,519 3,326 3,083 2,851
11 Nigeria 4,640 2,870 1,765 1,083 680 445 306 218 158 121
12 France 4,592 4,227 3,892 3,567 3,306 3,055 2,815 2,577 2,366 2,194
13 South Korea 4,083 3,562 3,089 2,644 2,241 1,861 1,508 1,305 1,071 887
14 Turkey 3,943 3,033 2,300 1,716 1,279 965 740 572 440 390
15 Vietnam 3,607 2,569 1,768 1,169 745 458 273 157 88 55
16 Canada 3,149 2,849 2,569 2,302 2,061 1,856 1,700 1,549 1,389 1,260
17 Pakistan 3,070 2,085 1,472 1,026 709 497 359 268 161 129
18 Philippines 3,010 2,040 1,353 882 582 400 289 215 162 117
19 Italy 2,950 2,737 2,559 2,444 2,391 2,326 2,224 2,072 1,914 1,809
20 Iran 2,663 2,133 1,673 1,273 953 716 544 415 312 245
21 Egypt 2,602 1,728 1,124 718 467 318 229 171 129 101
22 Bangladesh 1,466 1,001 676 451 304 210 150 110 81 63
Gross Domestic Product per capita (real)[26]
Rank 2050 Country 2050 2045 2040 2035 2030 2025 2020 2015 2010 2006 Percent growth from 2006 to 2050
1 United States 91,683 83,489 76,044 69,019 62,717 57,446 53,502 50,200 47,014 44,379 206%
2 South Korea 90,294 75,979 63,924 53,449 44,602 36,813 29,868 26,012 21,602 18,161 497%
3 United Kingdom 79,234 73,807 67,391 61,049 55,904 52,220 49,173 45,591 41,543 38,108 207%
4 Russia 78,435 65,708 54,221 43,800 34,368 26,061 19,311 13,971 9,833 6,909 1,137%
5 Canada 76,002 69,531 63,464 57,728 52,663 48,621 45,961 43,449 40,541 38,071 199%
6 France 75,253 68,252 62,136 56,562 52,327 48,429 44,811 41,332 38,380 36,045 208%
7 Germany 68,253 62,658 57,118 51,710 47,263 45,033 43,223 40,589 37,474 34,588 197%
8 Japan 66,846 60,492 55,756 52,345 49,975 46,419 42,385 38,650 36,194 34,021 196%
9 Mexico 63,149 49,393 38,255 29,417 22,694 17,685 13,979 11,176 8,972 7,918 797%
10 Italy 58,545 52,760 48,070 44,948 43,195 41,358 38,990 35,908 32,948 31,123 188%
11 Brazil 49,759 38,149 29,026 21,924 16,694 12,996 10,375 8,427 6,882 5,657 879%
12 China 49,650 39,719 30,951 23,511 17,522 12,688 8,829 5,837 3,463 2,041 2,432%
13 Turkey 45,595 34,971 26,602 20,046 15,188 11,743 9,291 7,460 6,005 5,545 822%
14 Vietnam 33,472 23,932 16,623 11,148 7,245 4,583 2,834 1,707 1,001 655 5,110%
15 Iran 32,676 26,231 20,746 15,979 12,139 9,328 7,345 5,888 4,652 3,768 867%
16 Indonesia 22,395 15,642 10,784 7,365 5,123 3,711 2,813 2,197 1,724 1,508 1,485%
17 India 20,836 14,446 9,802 6,524 4,360 2,979 2,091 1,492 1,061 817 2,550%
18 Pakistan 20,500 14,025 9,443 6,287 4,287 3,080 2,352 1,880 1,531 1,281 1,600%
19 Philippines 20,388 14,260 9,815 6,678 4,635 3,372 2,591 2,075 1,688 1,312 1,553%
20 Nigeria 13,014 8,934 6,117 4,191 2,944 2,161 1,665 1,332 1,087 919 1,416%
21 Egypt 11,786 7,066 5,183 3,775 2,744 2,035 1,568 1,260 897 778 908%
22 Bangladesh 5,235 3,767 2,698 1,917 1,384 1,027 790 627 510 427 1,225%
Gross Domestic Product in 2006 US$ billions[26]
Groups Countries 2050 2045 2040 2035 2030 2025 2020 2015 2010 2006
BRIC Brazil, Russia, India, China 128,324 98,757 74,483 55,090 40,278 28,925 20,226 13,653 8,640 5,637
G7 Canada, France, Germany, Italy, Japan, United Kingdom, USA 66,039 59,475 53,617 48,281 43,745 39,858 36,781 33,414 30,437 28,005
The following three tables are lists of economies by incremental GDP from 2006 to 2050 by Goldman Sachs. They illustrate that the BRICs and N11 nations are replacing G7 nations as the main contributors to world's economic growth. From 2020 to 2050, nine of the ten largest countries by incremental GDP are occupied by the BRICs and N11 nations, in which the United States remains to be the only G7 member as one of the three biggest contributors to the global economic growth.[26]
List of Economies by Incremental Nominal GDP from 2006 to 2020
Rank Country Incremental GDP in billions of 2006 US$
1 China 9,948
2 United States 4,733
3 India 1,939
4 Russia 1,572
5 Brazil 1,130
6 Mexico 891
7 Japan 888
8 United Kingdom 791
9 Germany 668
10 Italy 635
11 France 621
11 South Korea 621
13 Canada 440
14 Indonesia 402
15 Turkey 350
16 Iran 299
17 Vietnam 218
18 Nigeria 185
19 Philippines 172
20 Pakistan 139
21 Egypt 128
22 Bangladesh 87
List of Economies by Incremental Nominal GDP from 2020 to 2035
Rank Country Incremental GDP in billions of 2006 US$
1 China 21,718
2 United States 8,119
3 India 7,666
4 Brazil 2,769
5 Russia 2,711
6 Mexico 2,360
7 Indonesia 1,440
8 South Korea 1,136
9 Turkey 976
10 Vietnam 896
11 United Kingdom 836
12 Nigeria 777
13 France 752
14 Iran 729
15 Japan 662
16 Canada 602
17 Philippines 593
18 Germany 529
18 Egypt 502
20 Pakistan 441
21 Bangladesh 301
22 Italy 220
List of Economies by Incremental Nominal GDP from 2035 to 2050
Rank Country Incremental GDP in billions of 2006 US$
1 China 36,362
2 India 27,154
3 United States 12,417
4 Brazil 6,403
5 Mexico 5,238
6 Indonesia 4,818
7 Nigeria 3,557
8 Russia 3,315
9 Vietnam 2,438
10 Turkey 2,227
11 Philippines 2,128
12 Egypt 1,884
13 South Korea 1,439
14 Iran 1,390
15 Pakistan 1,376
16 United Kingdom 1,196
17 France 1,025
18 Bangladesh 1,015
19 Germany 976
20 Canada 847
21 Japan 791
22 Italy 506
At World Economic Forum 2011, there are 365 corporate executives from BRIC and other emerging nations out of 1000 participants. It is a record number of executives from emerging markets. Nomura Holdings Inc's co-head of global investment banking said that "It's a reflection of where economic power and influence is starting to move." The International Monetary Fund estimates emerging markets may expand 6.5 percent in 2011, more than double the 2.5 percent rate for developed countries. BRIC's takeover made record by 22 percent of global deals or increase by 74 percent in one year and more than quadruple in the last five years.[27]

[edit] History

The BRIC leaders in 2010
Various sources refer to a purported "original" BRIC agreement that predates the Goldman Sachs thesis. Some of these sources claim that President Vladimir Putin of Russia was the driving force behind this original cooperative coalition of developing BRIC countries. However, thus far, no text has been made public of any formal agreement to which all four BRIC states are signatories. This does not mean, however, that they have not reached a multitude of bilateral or even quadrilateral agreements. Evidence of agreements of this type are abundant and are available on the foreign ministry websites of each of the four countries. Trilateral agreements and frameworks made among the BRICs include the Shanghai Cooperation Organization (member states include Russia and China, observers include India) and the IBSA Trilateral Forum, which unites Brazil, India, and South Africa in annual dialogues. Also important to note is the G-20 coalition of developing states which includes all the BRICs.
Also, because of the popularity of the Goldman Sachs thesis "BRIC", this term has sometimes been extended whereby "BRICK"[28][29] (K for South Korea), "BRIMC"[30][31] (M for Mexico), "BRICA" (GCC Arab countries – Saudi Arabia, Qatar, Kuwait, Bahrain, Oman and the United Arab Emirates)[32] and "BRICET" (including Eastern Europe and Turkey)[33] have become more generic marketing terms to refer to these emerging markets.
In an August 2010 op-ed, Jim O'Neill of Goldman Sachs argued that Africa could be considered the next BRIC.[34] Analysts from rival banks have sought to move beyond the BRIC concept, by introducing their own groupings of emerging markets. Proposals include CIVETs (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), the EAGLES (Emerging and Growth-Leading Economies) and the 7 per cent Club (which includes those countries which have averaged economic growth of at least 7 per cent a year).[35]
South Africa sought BRIC membership since 2009 and the process for formal admission began as early as August 2010.[36] South Africa was officially admitted as a BRIC nation on December 24, 2010 after being invited by China and the other BRIC countries to join the group.[37] The capital "S" in BRICS stands for South Africa. President Jacob Zuma attend the BRICS summit in Sanya in April 2011 as a full member. South Africa stands at a unique position to influence African economic growth and investment. According to Jim O'neill of Goldman Sachs who originally coined the term, Africa's combined current gross domestic product is reasonably similar to that of Brazil and Russia, and slightly above that of India.[38] South Africa is a "gateway" to Southern Africa and Africa in general as the most developed African country.[38] China is South Africa's largest trading partner, and India wants to increase commercial ties to Africa.[36] South Africa is also Africa's largest economy, but as number 31 in global GDP economies it is far behind its new partners.[36]
Jim O'Neill expressed surprise when South Africa joined BRIC since South Africa's economy is a quarter of the size of Russia's (the least economically powerful BRIC nation).[39] He believed that the potential was there but did not anticipate inclusion of South Africa at this stage.[38] Martyn Davies, a South African emerging markets expert, argued that the decision to invite South Africa made little commercial sense but was politically astute given China's attempts to establish a foothold in Africa. Further, South Africa's inclusion in BRICS may translate to greater South African support for China in global fora.[39]
African credentials are important geopolitically, giving BRICS a four-continent breadth, influence and trade opportunities.[36] South Africa's addition is a deft political move that further enhances BRICS' power and status.[36] In the original essay that coined the term, Goldman Sachs did not argue that the BRICs would organize themselves into an economic bloc, or a formal trading association which this move signifies.[citation needed]

[edit] Marketing

The São Paulo Stock Exchange is the third-largest exchange operator by market value in the world.[40]
The BRIC term is also used by companies who refer to the four named countries as key to their emerging markets strategies. By comparison the reduced acronym IC would not be attractive, although the term "Chindia" is often used. The BRIC's study specifically focuses on large countries, not necessarily the wealthiest or the most productive and was never intended to be an investment thesis. If investors read the Goldman's research carefully, and agreed with the conclusions, then they would gain exposure to Asian debt and equity markets rather than to Latin America. According to estimates provided by the USDA, the wealthiest regions outside of the G6 in 2015 will be Hong Kong, South Korea and Singapore. Combined with China and India, these five economies are likely to be the world's five most influential economies outside of the G6.
On the other hand, when the "R" in BRIC is extended beyond Russia and is used as a loose term to include all of Eastern Europe as well, then the BRIC story becomes more compelling. At issue are the multiple serious problems which confront Russia (potentially unstable government, environmental degradation, critical lack of modern infrastructure, etc.[citation needed]), and the comparatively much lower growth rate seen in Brazil. However, Brazil's lower growth rate obscures the fact that the country is wealthier than China or India on a per-capita basis, has a more developed and global integrated financial system and has an economy potentially more diverse than the other BRICs due to its raw material and manufacturing potential. Many other Eastern European countries, such as Poland, Romania, the Czech Republic, Slovakia, Hungary, Bulgaria, and several others were able to continually sustain high economic growth rates and do not experience some of the problems that Russia experiences or experience them to a lesser extent. In terms of GDP per capita in 2008, Brazil ranked 64th, Russia 42nd, India 113th and China 89th. By comparison South Korea ranked 24th and Singapore 3rd.
Brazil's stock market, the Bovespa, has gone from approximately 9,000 in September 2002 to over 70,000 in May 2008. Government policies have favored investment (lowering interest rates), retiring foreign debt and expanding growth, and a reformulation of the tax system is being voted in the congress. The British author and researcher Mark Kobayashi-Hillary wrote a book in 2007 titled 'Building a Future with BRICs' for European publisher Springer Verlag that examines the growth of the BRICs region and its effect on global sourcing. Contributors to the book include Nandan Nilekani, and Shiv Nadar.

[edit] International Law

Brazilian lawyer and author Adler Martins has published a paper called "Contratos Internacionais entre os países do BRIC"[41] (International Agreements Among BRIC countries) which highlights the international conventions ratified by the BRIC countries, which allow them to maintain trade and investment activities safely within the group. Mr. Martin's study is being further developed by the Federal University of the Minas Gerais State, in Brazil.

[edit] Financial diversification

It has been argued that geographic diversification would eventually generate superior risk-adjusted returns for long-term global investors by reducing overall portfolio risk while capturing some of the higher rates of return offered by the emerging markets of Asia, Eastern Europe and Latin America.[42] By doing so, these institutional investors have contributed to the financial and economic development of key emerging nations such as Brazil, India, China, and Russia. For global investors, India and China constitute both large-scale production platforms and reservoirs of new consumers, whereas Russia is viewed essentially as an exporter of oil and commodities- Brazil and Latin America being somehow "in the middle".

[edit] Criticism

A criticism is that the BRIC projections are based on the assumptions that resources are limitless and endlessly available when needed. In reality, many important resources currently necessary to sustain economic growth, such as oil, natural gas, coal, other fossil fuels, and uranium might soon experience a peak in production before enough renewable energy can be developed and commercialized, which might result in slower economic growth than anticipated, thus throwing off the projections and their dates. The economic emergence of the BRICs will have unpredictable consequences for the global environment. Indeed, proponents of a set carrying capacity for the Earth may argue that, given current technology, there is a finite limit to how much the BRICs can develop before exceeding the ability of the global economy to supply.[43]
Academics and experts have suggested that China is in a league of its own compared to the other BRIC countries.[44] As David Rothkopf wrote in Foreign Policy, "Without China, the BRICs are just the BRI, a bland, soft cheese that is primarily known for the whine [sic] that goes with it. China is the muscle of the group and the Chinese know it. They have effective veto power over any BRIC initiatives because without them, who cares really? They are the one with the big reserves. They are the biggest potential market. They are the U.S. partner in the G2 (imagine the coverage a G2 meeting gets vs. a G8 meeting) and the E2 (no climate deal without them) and so on."[45] Deutsche Bank Research said in a report that "economically, financially and politically, China overshadows and will continue to overshadow the other BRICs." It added that China's economy is larger than that of the three other BRIC economies (Brazil, Russia and India) combined. Moreover, China's exports and its official foreign-exchange reserves are more than twice as large as those of the other BRICs combined.[46] In that perspective, some pension investment experts have argued that "China alone accounts for more than 70% of the combined GDP growth generated by the BRIC countries [from 1999 to 2010]: if there is a BRIC miracle it's first and foremost a Chinese one".[47] The "growth gap" between China and other large emerging economies such as Brazil, Russia and India can be attributed to a large extent to China's early focus on ambitious infrastructure projects: while China invested roughly 9% of its GDP on infrastructure in the 1990s and 2000s, most emerging economies invested only 2% to 5% of their GDP. This considerable spending gap allowed the Chinese economy to grow at near optimal conditions while many South American and South Asian economies suffered from various development bottlenecks (poor transportation networks, aging power grids, mediocre schools...).[48]
The preeminence of China and India as major manufacturing countries with unrealised potential has been widely recognised, but some commentators state that China's and Russia's large-scale disregard for human rights and democracy could be a problem in the future. Human rights issues do not inform the foreign policies of these two countries to the same extent as they do the policies of other large states such as Japan, India, the EU states and the USA. There is also the possibility of conflict over Taiwan in the case of China.
There is also the issue of population growth. The population of Russia has been declining rapidly in the 1990s and only recently did the Russian government predict the population to stabilize and grow in 2020. Brazil's and China's populations will begin to decline in several decades[citation needed], with their demographic windows closing in several decades as well. This may have implications for those countries' future, for there might be a decrease in the overall labor force and a negative change in the proportion of workers to retirees.
Brazil's economic potential has been anticipated for decades, but it had until recently consistently failed to achieve investor expectations.[citation needed] Only in recent years has the country established a framework of political, economic, and social policies that allowed it to resume consistent growth. The result has been solid and paced economic development that rival its early 70's "miracle years", as reflected in its expanding capital markets, lowest unemployment rates in decades, and consistent international trade surpluses - that led to the accumulation of reserves and liquidation of foreign debt (earning the country a coveted investment grade by the S&P and Fitch Ratings in 2008).
Finally, India's relations with its neighbor Pakistan have always been tense. In 1998, there was a nuclear standoff between Pakistan and India.[49] Border conflicts with Pakistan, mostly over the long held dispute over Kashmir, has further aggravated any economic ties. This impedes progress by limiting government finances, increasing social unrest, and limiting potential domestic economic demand. Factors such as international conflict, civil unrest, unwise political policy, outbreaks of disease and terrorism are all factors that are difficult to predict and that could have an effect on the destiny of any country.
Other critics suggest that BRIC is nothing more than a neat acronym for the four largest emerging market economies,[citation needed] but in economic and political terms nothing else (apart from the fact that they are all big emerging markets) links the four. Two are manufacturing based economies and big importers (China and India), but two are huge exporters of natural resources (Brazil and Russia). The Economist, in its special report on Brazil, expressed the following view: "In some ways Brazil is the steadiest of the BRICs. Unlike China and Russia it is a full-blooded democracy; unlike India it has no serious disputes with its neighbors. It is the only BRIC without a nuclear bomb." The Heritage Foundation's "Economic Freedom Index", which measures factors such as protection of property rights and free trade ranks Brazil ("moderately free") above the other BRICs ("mostly unfree").[50] Henry Kissinger has stated that the BRIC nations have no hope of acting together as a coherent bloc in world affairs, and that any cooperation will be the result of forces acting on the individual nations.[citation needed]
It is also noticed that BRIC countries have undermined qualitative factors that is reflected in deterioration in Doing Business ranking 2010 and other several human indexes.[51]
In a not-so-subtle dig critical of the term as nothing more than a shorthand for emerging markets generally, critics have suggested a correlating term, CEMENT (Countries in Emerging Markets Excluded by New Terminology). Whilst they accept there has been spectacular growth of the BRIC economies, these gains have largely been the result of the strength of emerging markets generally, and that strength comes through having BRICs and CEMENT.[52]

[edit] Proposed inclusions

Mexico and South Korea are currently the world's 13th and 15th largest by nominal GDP just behind the BRIC and G7 economies. Both are experiencing rapid GDP growth of 5% every year, a figure comparable to Brazil from the original BRICs. Jim O'Neill, expert from the same bank and creator of the economic thesis, stated that in 2001 when the paper was created, it did not consider Mexico, but today it has been included because the country is experiencing the same factors that the other countries first included present.[30][31] While South Korea was not originally included in the BRICs, recent solid economic growth led to Goldman Sachs proposing to add Mexico and South Korea to the BRICs, changing the acronym to BRIMCK, with Jim O'Neill pointing out that Korea "is better placed than most others to realize its potential due to its growth-supportive fundamentals.[53] Again Jim O'Neil recently created the term MIKT that stands for Mexico, Indonesia, Korea (South Korea), and Turkey.[54]
A Goldman Sachs paper published later in December 2005 explained why Mexico and South Korea weren't included in the original BRICs. According to the paper,[5] among the other countries they looked at, only Mexico and South Korea have the potential to rival the BRICs, but they are economies that they decided to exclude initially because they looked to them as already more developed. However, due to the popularity of the Goldman Sachs thesis, "BRIMC" and "BRICK" are becoming more generic marketing terms to refer to these six countries.
In their paper "BRICs and Beyond", Goldman Sachs stated that "Mexico, the four BRIC countries and South Korea should not be really thought of as emerging markets in the classical sense", adding that they are a "critical part of the modern globalised economy" and "just as central to its functioning as the current G7".[55]
The term is primarily used in the economic and financial spheres as well as in academia. Its usage has grown specially in the investment sector, where it is used to refer to the bonds emitted by these emerging markets governments.[56][57][58]

[edit] Mexico

Primarily, along with the BRICs,[59] Goldman Sachs argues that the economic potential of Brazil, Russia, India, Mexico and China is such that they may become (with the USA) the six most dominant economies by the year 2050. Due to Mexico's rapidly advancing infrastructure, increasing middle class and rapidly declining poverty rates it is expected to have a higher GDP per capita than all but three European countries by 2050, this new found local wealth also contributes to the nation's economy by creating a large domestic consumer market which in turn creates more jobs.

Mexico in 2050[60]
GDP in USD $9.340 trillion
GDP per capita $63,149
GDP growth (2015–2050) 4.0%
Total population 142 million

[edit] South Korea

South Korea is by far the most highly developed country when compared to the BRICs and N-11s. It has achieved an incomparable level of development compared to these groups, with its Human Development Index higher than some of the world's most advanced economies, including France, UK, Austria, Denmark, Finland and Belgium. When compared to other OECD members in 2010, South Korean workers had a higher disposable income than Germany, Japan and Sweden, by far the highest in Asia with the strongest growth rate that is more than quadruple that of the United States in the same period. Despite these conditions, it has been achieving growth rates of 4-6%, a figure more than double to triple that of other advanced economies. More importantly, it has a significantly higher Growth Environment Score (Goldman Sachs' way of measuring the long-term sustainability of growth) than all of the BRICs or N-11s.[55] Commentators such as William Pesek Jr. from Bloomberg argue that Korea is "Another 'BRIC' in Global Wall", suggesting that it stands out from the Next Eleven economies. By GDP (PPP), South Korea already overtook a G7 and G8 economy, Canada, in 2009, surpassing Spain in 2010. According to the International Monetary Fund World Economic Outlook, it will overtake Italy in 2014 and Mexico in 2016 to become one of the world's top ten economies and the 6th largest among developed countries. In terms of GDP per capita (PPP), South Korea has surpassed many developed countries, including Portugal in 2003, New Zealand in 2008 and Greece, Spain and Italy in 2010. At current speeds, it will surpass Japan and France in 2016. While measuring the South Korean economy by nominal GDP is inaccurate as the South Korean won is artificially kept low to boost exports, economists from other investment firms argue that even when measured by nominal GDP per capita, South Korea will achieve over $96,000 by 2050, surpassing the United States and by far the wealthiest among the world's major economies, suggesting that wealth is more important than size for bond investors, stating that Korea's credit rating will be rated AAA sooner than 2050.[61]

[edit] United Korea

Pyongyang, North Korea
In September 2009, Goldman Sachs published its 188th Global Economics Paper named "A United Korea?" which highlighted in detail the potential economic power of a United Korea, which will surpass all current G7 countries except the United States, such as Japan, the United Kingdom, Germany and France within 30–40 years of reunification, estimating GDP to surpass $6 trillion by 2050.[62] The young, skilled labor and large amount of natural resources from the North combined with advanced technology, infrastructure and large amount of capital in the South, as well as Korea's strategic location connecting three economic powers, is likely going to create an economy larger than the bulk of the G7. According to some opinions, a reunited Korea could occur before 2050,[62] or even between 2010 and 2020.[63] If it occurred, Korean reunification would immediately raise the country's population to over 70 million.[64]
Korea in 2050[65]
Korea United Korea South Korea North Korea
GDP in USD $6.056 trillion $4.073 trillion $12.5 billion
GDP per capita $86,000 $96,000 $560
GDP growth (2015–2050) 4.8% 3.9% -0.008%
Total population 71 million 42 million 23 million

[edit] See also

[edit] References

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  63. ^ "Questia Online Library". Questia.com. http://www.questia.com/googleScholar.qst?docId=5002508142. Retrieved 2010-10-15.
  64. ^ List of countries by population
  65. ^ "Global Economics Paper No: 188 "A United Korea?"" (PDF). http://www.nkeconwatch.com/nk-uploads/global_economics_paper_no_188_final.pdf. Retrieved 2010-10-15.

[edit] Bibliography

  • Elder, Miriam, and Leahy, Joe, et al., Who's who: Bric leaders take their place at the top table, Financial Times, London, September 25, 2008
  • Firzli, M. Nicolas, "Forecasting the Future: The BRICs and the China Model", JTW/ USAK Research Center, Mar 9 2011
  • Kateb, Alexandre, Les nouvelles puissances mondiales. Pourquoi les BRIC changent le monde" (The new global powers. Why the BRIC change the world) (in French), Paris : Ellipses, 2011, 272 p. ISBN 978-2-7298-6473-6
  • O'Neill, Jim, BRICs could point the way out of the Economic Mire, Financial Times, London, September 23, 2008, p. 28.
  • Mark Kobayashi-Hillary, 'Building a Future with BRICs: The Next Decade for Offshoring' (Nov 2007). ISBN 978-3-540-46453-2.
  • J. Vercueil, Les pays émergents. Brésil-Russie-Inde-Chine... Mutations économiques et nouveaux défis (Emerging Countries. Brazil - Russia - India - China... Economic Transformations and new Challenges) (in French), Paris : Bréal, 2010, 207 p. ISBN 978-2-7495-0957-0
  • Paulo Borba Casella, "BRIC : Brésil, Russie, Inde, Chine et Afrique du Sud - A l'heure d'un nouvel ordre juridique international, éd. A.Pedone, Paris, Sept. 2011, EAN ISBN :9782233006264

The IMF and World Bank Are Major Causes of Poverty in Africa

From the Archives
Posted on March 23, 2007
Previously filed under: Africa, Opinions and Editorials
Opinion article questions the efficacy of IMF and World Bank policies in the developing world.
Photo Credit: Cassandra Nelson/Mercy Corps
Trade liberalization can have negative effects on local industries. Photo Credit: Cassandra Nelson/Mercy Corps

The International Monetary Fund (IMF) and the World Bank are the major cause of poverty in African countries today. Despite claims that they will reduce poverty in Africa, it is widely accepted that most of the debts, as a cause of poverty in Africa, are due to the policies of the International Monetary Fund (IMF) and the World Bank.

Their programmes have been heavily criticized over the years because they most times result in poverty scenarios. The IMF and the World Bank's polices are very different now from what they were originally intended for. These two monetary institutions were first formed by 44 nations at the Bretton Woods Conference in 1944 with the goal of creating a stable framework for the post-war global economy.

The IMF in particular, was originally formed to promote steady growth and full employments by offering unconditional loans to economies in crises and establishing mechanisms to stabilize exchange rates and facilitate currency exchange.

Much of these visions never came to reality. Pressure from the US government made IMF start offering loans based on strict conditions. Critics have said that these policies have reduced the level of social safety and worsened labour and environmental standards in developing countries.

The World Bank, initially known as the International Bank for Reconstructions and Development, was formed to fund the rebuilding of infrastructure in nations ravaged by World War II. Its focus soon changed in the mid 1980's. The Bank turned its attention away from Europe to the third World countries, most of which are in Africa. It started funding massive industrial development projects in Africa, Asia, and Latin America.

Critics say that IMF policies have reduced the level of social safety and worsened labour and environmental standards in developing countries.
Most Scholars and human rights activists contend that the Bank's aggressive dealings with developing nations, which were often ruled by dictatorial regimes, exacerbated the developing world's growing debt crisis, devastated local ecologies and indigenous communities.

The World Bank and IMF adjustment programmes differ according to the role of each institution. IMF's loan conditions focus on monetary and fiscal issues. They emphasize programmes to address inflation and balance of payment problems, often requiring specific levels of cut backs in total government spending.

The adjustment programmes of the World Bank are wider in scope, with a more long-term development focus.

They highlight market liberalizations, seen as promoting growth theory expanding exports particularly cash crops.

The IMF and World Bank are largely controlled and owned by the development nations such as USA, Germany, UK, Japan, amongst others. The US for example controls 17 to 18% of the voting right at the IMF. When an 85% majority is required for a decision, the US effectively has veto power at the IMF. In addition, the World Bank is 51% funded by the US treasury.

Under a plane devised mechanism the World Bank and the IMF loan money in return for the structural adjustment of their economies. This means that economic direction of each country would be planned, monitored, and controlled in Washington. For instance, the World Bank assistance for helping a poor country involves, country by country investigations with a meeting of begging-Finance Ministers who are handed a restructuring agreement pre-drafted for voluntary signature.

Trade liberalization can lead to dumping of cheap and substandard products from outside. This undermines local industries that produce or intend to produce the same products.
According to James Sackey, former World Bank Country Representative in Sierra Leone, these instructions include privatizations, trade liberalization, high interest rates etc. Trade liberalization for under-developed economies could have some serious attendant effects.

For one, it could lead to dumping of cheap and substandard products from outside. Such items as clothes, shoes, creams are just amongst many others that flood markets in developing economies.
This undermines local industries that produce or intend produce the same products.

Africa's infant industries fail to take off under extensive trade liberalization. This is also very critical with respect to imported food such as rice, wheat, milk, amongst others. Developed countries which have excess of these food items reduce their prices and export them to Africa as a way of getting rid of them. If such situations were not conditioned, Africa would never be able to produce its own food.

Privatization, on the other hand, and its effects on government enterprises that do not function well cannot be challenged. But wholesale privatization of everything that is government owned cannot also be justified. In any case, there are few difficulties such as the limited indigenous business to take over government enterprises; the shortages of local private capital to pay for the running cost of privatized enterprises and the greater importance of the services to the people of some enterprises as compared to being profitable.

What often happens is that it is the so-called soft sectors of education, health, and housing amongst others that will suffer from the cut in government expenditure.
Also high interest rates increase the incentive to save money, but they also encourage speculative investment that brings quick paper money profits to a few people while adding nothing to the productive capacity. High interest rates and high credit also make capital to start new business get difficult to come by. Therefore, they result in stagnation.

Again the cut in government expenditure in some cases could be necessary. However, what often happens is that it is the so-called soft sectors of education, health, and housing amongst others that will suffer from the cut in government expenditure. Most governments do not reduce expenditure on the army or on their non-productive and unnecessary areas. The result is that cut in government expenditure ends up harming the welfare of the people.

Another very important factor is the devaluation of currencies which is supposed to increase self sufficiency by making imported products more expensive and African exports cheaper. Since most African countries do not produce these products, it is not possible to replace them with locally produced ones.

On the other hand, most of the countries that buy African products have set certain amounts on how much can be imported or have fixed prices in foreign currencies to shelter their own products, even when they become cheaper in local currencies, do not necessarily gain new outside markets or earn more foreign exchange.


From Wikipedia, the free encyclopedia
Jump to: navigation, search
Offshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring.[1] More recently, offshoring has been associated primarily with the sourcing of technical and administrative services supporting domestic and global operations from outside the home country, by means of internal (captive) or external (outsourcing) delivery models.[2]
The term is in use in several distinct but closely related ways. It is sometimes used broadly to include substitution of a service from any foreign source for a service formerly produced internally to the firm. In other cases, only imported services from subsidiaries or other closely related suppliers are included. A further complication is that intermediate goods, such as partially completed computers, are not consistently included in the scope of the term.[3]
Offshoring can be seen in the context of either production offshoring or services offshoring. After its accession to the World Trade Organization (WTO) in 2001, the People's Republic of China emerged as a prominent destination for production offshoring. Another focus area has been the software industry as part of Global Software Development and developing Global Information Systems. After technical progress in telecommunications improved the possibilities of trade in services, India became a country leading in this domain though many parts of the world are now emerging as offshore destinations.
The economic logic is to reduce costs. If some people can use some of their skills more cheaply than others, those people have the comparative advantage. The idea is that countries should freely trade the items that cost the least for them to produce.



[edit] Frequently used terms

Offshoring is defined as the movement of a business process done at a company in one country to the same or another company in another, different country. Almost always work is moved because of a lower cost of operations in the new location. More recently, offshoring drivers also include access to qualified personnel abroad, in particular in technical professions, and increasing speed to market.[2] Offshoring is sometimes contrasted with outsourcing or offshore outsourcing. Outsourcing is the movement of internal business processes to an external organizational unit. Outsourcing refers to the process by which an organization gives part of its work to another firm / organization and makes it responsible for most of the applications as well as the design of the enterprise business process. This process is done under restrictions and strategies in order to establish consistency with the offshore outsourcing organizations. Many companies nowadays outsource various professional areas in the company such as e-mail services, payroll and call center. These jobs are being handled by other organizations that specialize in each sector allowing the off-shoring company to focus more on other business concerns . However, subcontracting in the same country would be outsourcing, but not offshoring. A company moving an internal business unit from one country to another would be offshoring or physical restructuring, but not outsourcing. A company subcontracting a business unit to a different company in another country would be both outsourcing and offshoring.
Related terms include nearshoring, which implies relocation of business processes to (typically) lower cost foreign locations, but in close geographical proximity (e.g., shifting United States-based business processes to Canada/Latin America); inshoring, which means picking services within a country; and bestshoring or rightshoring, picking the "best shore" based on various criteria. Business process outsourcing (BPO) refers to outsourcing arrangements when entire business functions (such as Finance & Accounting, Customer Service, etc.) are outsourced. More specific terms can be found in the field of software development - for example Global Information System as a class of systems being developed for / by globally distributed teams.
A further term sometimes associated with offshoring is bodyshopping which is the practice of using offshored resources and personnel to do small disaggregated tasks within a business environment, without any broader intention to offshore an entire business function.

[edit] Production off-shoring

Production offshoring also known as physical restructuring of established products involves relocation of physical manufacturing processes to a lower-cost destination. Examples of production offshoring include the manufacture of electronic components in Costa Rica, production of apparel, toys, and consumer goods in China, Vietnam etc.
Product design, research and the development process that leads to new products, are relatively difficult to offshore. This is because research and development to improve products and create new reference designs requires a skill set that is harder to obtain in regions with cheap labor. For this reason, in many cases only the manufacturing will be offshored by a company wishing to reduce costs.
However, there is a relationship between offshoring and patent system strength. This is because companies under a strong patent system are not afraid to offshore work because their work will remain their property. Conversely, companies in countries with weak patent systems have an increased fear of intellectual property theft from foreign vendors or workers, and, therefore, have less offshoring.
Physical restructuring got its big push when the North American Free Trade Agreement (NAFTA) made it easier for manufacturers to shift production facilities from the US to Mexico. This trend later shifted to China, which offered cheap prices through very low wage rates, few workers' rights laws, a fixed currency pegged to the US dollar, (currently fixed to a basket of economies) cheap loans, land, and factories for new companies, few environmental regulations, and huge economies of scale based on cities with populations over a million workers dedicated to producing a single kind of product. However, many companies are reluctant to move high value-added production of leading-edge products to China because of lax enforcement of intellectual property laws.[4] CAFTA has increased the velocity at which physical restructuring is occurring.

[edit] IT-enabled services offshoring

The growth of IT-enabled services offshoring is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecommunication and Internet expansion of the late 1990s. This was seen all the way up to the year 2000. Coupled with the digitization of many services, it was possible to shift the actual production location of services to low cost countries in a manner theoretically transparent to end-users. Services include administrative services, such as finance and accounting, HR, and legal; call centers; marketing and sales services; IT infrastructure; application development; and knowledge services, including engineering support, product design, research and development, and analytics.
India first benefited from the offshoring trend as it has a large pool of English speaking people[5] and technically proficient manpower. India's offshoring industry took root in low-end IT functions in the early 1990s and has since moved to back-office processes such as call centers and transaction processing. In the late 1990s, India's abundant and well qualified software engineering talent combined with massive demand from the Y2K problem[citation needed] helped to move India up the value chain to attract large-scale software development projects for US based customers. This spawned the neologism Bangalored, used to indicate a layoff, often systemic, and usually resulting from corporate outsourcing to lower wage economies – derived from Bangalore in India, where some of the first outsource centers were located.[6]
Currently, India's engineering talent has made India the offshoring destination of global firms like HP, IBM, Accenture, Intel, AMD, Microsoft, Oracle Corporation, Cisco, SAP, and BEA.
Because of inflation, high domestic interest rates, robust economic growth and increased IT offshoring, Indian IT sector has witnessed 10 - 15% wage growth in the 21st century. Consequently, Indian's operations and firms are concerned that they are becoming too expensive in comparison with competition from the other offshoring destinations. To maintain high growth rates, attempts have been made to grow up the value chain and diversify to other high-end work in addition to software and hardware engineering. These jobs include research and development, equity analysis, tax-return processing, radiological analysis, medical transcription, and more.
The choice of offshoring destination is often made according to cultural concerns. Japanese companies are starting to outsource to China, where large numbers of Japanese speakers can be found — particularly in the city of Dalian, which was Japanese-occupied Chinese territory for decades (this is discussed in the book The World is Flat). German companies tend to outsource to Poland and Romania, where proficiency in German is common.[7] French companies outsource to North Africa for similar reasons. For Australian IT companies, Indonesia is one of the major choice of offshoring destination. Near shore location, common time zone and adequate IT work force are the reasons of offshoring IT services to Indonesia.
Other offshoring destinations include Mexico, Central and South America, the Philippines, South Africa and Eastern European countries.
The Central America Free Trade Agreement (CAFTA) made nearshoring more attractive between the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic and the US.

[edit] Innovation offshoring

Once companies are comfortable with services offerings and started realizing the cost savings, many high-tech product companies, including some in Silicon Valley, started offshoring innovation work to countries like South Africa, India, China, Mexico, and Russia. Accessing the talent pools in these countries has the potential to cut costs or even shorten product lifecycles. Developing countries like India are usually involved in this practice.
When offshoring knowledge work, firms heavily rely on the availability of technical personnel at offshore locations. In order to secure access to talent, Western firms often establish collaborative relationships with technical universities abroad and thereby customize university programs to serve their particular needs. Examples include universities in Shanghai, such as Tong-Ji University, where German firms and scholars co-sponsor labs, courses, and provide internships. Similar examples of collaborative arrangements can be found in Eastern Europe, e.g. Romania.[7]

[edit] Re-shoring

"Re-shoring" (sometimes "Backshoring"[8]) is offshoring that has been brought back onshore.

[edit] Focus and strategy in offshoring

To survive in the outsourcing world, strength in multiple terms is necessary. On one hand, while it is important to have robust processes and structures in place, with manpower to execute projects, on the other hand it is necessary for firms to have their strategy firmly in place.[9] While the Vision and Mission define the ethos of any enterprise, irrespective of the field in it, yet this is necessary to drive the wheel of a company forward. It is undoubted that strategy varies as an offshoring enterprise evolves and goes through its various phases of growth. While nascent players may look at opportunities to grab and work upon, established players have a well set and defined plan of action. Players in the growth phase are the ones who have strategy targeted at achieving the ulterior goal and demonstrate perseverance and drive to achieve the same. These trends are truly reflective of the path that some of the established players today have had in mind. Being a business model, which has a unique driving force behind is, the fact that the industry as a whole has coped rather well with the economic downturn. For those who have grown and escalated in this scenario, it is their strategy in view of their ultimate vision and mission to which credit must be attributed.[10]

[edit] Transfer of intellectual property

Offshoring is often enabled by the transfer of valuable information to the offshore site. Such information and training enables the remote workers to produce results of comparable value previously produced by internal employees. When such transfer includes protected materials, as confidential documents and trade secrets, protected by non-disclosure agreements, then intellectual property has been transferred or exported. The documentation and valuation of such exports is quite difficult, but should be considered since it comprises items that may be regulated or taxable.

[edit] Debate

Offshoring has been a controversial issue spurring heated debates among economists, some of which overlap those related to the topic of free trade. It is seen as benefiting both the origin and destination country through free trade, providing jobs to the destination country and lower cost of goods and services to the origin country. This makes both sides see increased gross domestic product (GDP). And the total number of jobs increase in both countries since those workers in the origin country that lost their job can move to higher-value jobs in which their country has a comparative advantage.
On the other hand, job losses and wage erosion in developed countries have sparked opposition to offshoring. Experts argue that the quality of any new jobs in developed countries are less than the jobs lost and offer lower pay. Economists against offshoring charge that currency manipulation by governments and their central banks causes the difference in labor cost creating an illusion of comparative advantage. Further, they point out that even more educated highly trained workers with higher-value jobs such as software engineers, accountants, radiologists, and journalists in the developed world have been displaced by highly educated and cheaper workers from India and China. On May 1, 2002, Economist and former Ambassador Ernest H. Preeg testified before the Senate committee on Banking, Housing, and Urban Affairs that China, for instance, pegs its currency to the dollar at a sub-par value in violation of Article IV of the International Monetary Fund Articles of Agreement which state that no nation shall manipulate its currency to gain a market advantage.[11] Traditionally "safe" developed world jobs in R&D and the Science, Technology, Engineering, and Mathematics (STEM) fields are now perceived to be endangered in these countries as higher proportions of workers are trained for these fields in developing nations. Economists such as Paul Craig Roberts claim that those economists who promote offshoring misunderstand the difference between comparative advantage and absolute advantage.

[edit] Level-of-service concerns

With the off-shoring of call-center type applications, debate has also surfaced that this practice does serious damage to the quality of customer service and technical support that customers receive from companies who do it. Many companies have caught much public ire for their decisions to use foreign labor for customer service and technical support, mostly because of the apparent language barrier that it creates. While some nations have a high level of younger, skilled workers who are capable of speaking English as one of their native languages, their English skills have caused debate in North America and Europe.[citation needed]
Criticisms of outsourcing from much of the American public have been a response to what they view as very poor customer service and technical support being provided by overseas workers attempting to communicate with Americans.

[edit] Supply chain concerns

Some claim that companies lose control and visibility across their extended supply chain under outsourcing, creating increased risks. A 2005 quantitative survey of 121 electronics industry participants by Industry Directions Inc and the Electronics Supply Chain Association (ESCA) found that 69% of respondents said they had less control over at least 5 of their key supply chain processes since the outsourced model took hold, while 66% of providers felt their aggregate risk with customers was high or very high.[citation needed] 36% of providers responded that they felt an increased risk of uncertainty compared to their uncertainty risk before the rise to prominence of the outsourced model.[citation needed] 62% of respondents described as "problematic" at least two core trading partner management practices, which included performance management and simple agreement on results.[citation needed] 40% of all respondents encountered resistance to sharing risk in outsourced partnership agreements, according to the research.[citation needed]

[edit] Competitive concerns

The transfer of knowledge outside a country may create competitors to the original companies themselves. Chinese manufacturers are already selling their goods directly to their overseas customers, without going through their previous domestic intermediaries that originally contracted their services. In the 1990s and 2000s, American automakers increasingly turned to China to create parts for their vehicles. By 2006, China leveraged this know-how and announced that they will begin competition with American automakers in their home market by selling fully Chinese automobiles directly to Americans. When a company moves the production of goods and services to another country, the investment that companies would otherwise make in the domestic market is transferred to the foreign market. Corporate money spent on factories, training, and taxes, which would otherwise be spent in the market of the company is then spent in the foreign market. As production increases in the foreign market, qualified and experienced domestic workers leave or are forced out of their jobs, often permanently leaving the industry. At some point, dramatically fewer domestic workers are left who are qualified to perform the work. This makes the domestic market dependent on the foreign market for those goods and services, thereby strategically weakening the "hollowed-out" domestic country. In effect, offshoring creates and strengthens the competitive industries of the foreign country while strategically weakening the domestic country.[dubious ]
However, employment data has cast doubt on this claim. For example, IT employment in the United States has recently reached pre-2001 levels[12][13] and has been rising since. The number of jobs lost to offshoring is less than 1 percent of the total US labor market.[14] According to a study by the Heritage foundation, outsourcing represents a very small proportion of jobs lost in the US. The total number of jobs lost to offshoring, both manufacturing and technical represent only 4 percent of the total jobs lost in the US. Major reasons for cutting jobs are from contract completion and downsizing.[15] Some economists and commentators claim that the offshoring phenomenon is way overblown.[15]

[edit] Retraining concerns

One solution often offered for domestic workers displaced by offshoring is retraining to new jobs. Some displaced workers are highly educated and possess graduate qualifications. Retraining to their current level in another field may not be an option because of the years of study and cost of education involved. Anecdotal evidence also suggests they would be rejected for being overqualified.

[edit] Effects of factor of production mobility

According to classical economics, the three factors of production are land, labor, and capital. Offshoring relies heavily on the mobility of two of these factors. That is, how offshoring affects economies depends on how easily capital and labor can be repurposed. Land, as a factor of production, is generally seen to have little or no mobility potential.
The effects of capital mobility on offshoring have been widely discussed. In microeconomics, a corporation must be able to spend working capital to afford the initial costs of offshoring. If the state heavily regulates how a corporation can spend its working capital, it will not be able to offshore its operations. For the same reason the macroeconomy must be free for offshoring to succeed. Generally, those who favor offshoring support capital mobility, and those who oppose offshoring call for greater regulation.
Labor mobility also plays a major role, and it is hotly debated. When computers and the Internet made work electronically portable, the forces of free market resulted in a global mobility of work in the services industry. Most theories that argue offshoring eventually benefits domestic workers assume that those workers will be able to obtain new jobs, even if they have to obtain employment by downpricing themselves back into the labor market (by accepting lower salaries) or by retraining themselves in a new field. Foreign workers benefit from new jobs and higher wages when the work moves to them.

[edit] History

In the developed world, moving jobs out of the country dates to at least the 1960s[16] and has continued since then. It was characterized primarily by the transferring of factories from the developed to the developing world. This offshoring and closing of factories has caused a structural change in the developed world from an industrial to a post-industrial service society.
During the 20th century, the decreasing costs of transportation and communication crossed with great disparities on pay rates made increased offshoring from wealthier countries to less wealthy countries financially feasible for many companies. Further, the growth of the Internet, particularly fiber-optic intercontinental long haul capacity, and the World Wide Web reduced "transportation" costs for many kinds of information work to near zero.[17]
With the development of the Internet, many new categories of work such as call centres, computer programming, reading medical data such as X-rays and magnetic resonance imaging, medical transcription, income tax preparation, and title searching are being offshored.
Before the 1990s, Ireland was one of the poorest countries in the EU. Because of Ireland's relatively low corporate tax rates, US companies began offshoring of software, electronic, and pharmaceutical intellectual property to Ireland for export. This helped create a high-tech "boom" and which led to Ireland becoming one of the richest EU countries.[17]
In 1994 the North American Free Trade Agreement (NAFTA) went into effect. As concerns are widespread about uneven bargaining powers, and risks and benefits, negotiations are often difficult, such that the plan to create free trade areas (such as Free Trade Area of the Americas) has not yet been successful. In 2005, offshoring of skilled work, also referred to as knowledge work, dramatically increased from the US, which fed the growing worries about threats of job loss.[17]

[edit] See also

By sector:

[edit] Literature

  • Ashok Deo Bardhan and Cynthia Kroll, "The New Wave of Outsourcing" (November 2, 2003). Fisher Center for Real Estate & Urban Economics. Fisher Center Research Reports: Report #1103. http://repositories.cdlib.org/iber/fcreue/reports/1103
  • Alan E. Blinder, Offshoring: The Next Industrial Revolution?, in: Foreign Affairs, Vol. 85, No.2, March/April 2006, 113-128.
  • Vinaj Couto, Mahadeva Mani, Vikas Sehgal, Arie Y. Lewin, Stephan Manning, Jeff W. Russell, Offshoring 2.0: Contracting Knowledge and Innovation to Expand Global Capabilities Offshoring Research Network 2007 Service Provider Report.
  • Georg Erber, Aida Sayed-Ahmed, Offshore Outsourcing - A Global Shift in the Present IT Industry , in: Intereconomics, Volume 40, Number 2, March 2005, 100 - 112
  • Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-First Century 2005 ISBN 0-374-29288-4
  • Gary Gereffi and Vivek Wadhwa, "Framing the Engineering Outsourcing Debate: Placing the United States on a Level Playing Field with India and China" (2006) http://memp.pratt.duke.edu/outsourcing
  • Ron Hira and Anil Hira, with forward by Lou Dobbs, Outsourcing America: What's behind Our National Crisis and how we can reclaim American Jobs. (May 2005). ISBN 0-8144-0868-0.
  • Bradford Jensen and Lori Kletzer (September 2005), "Tradable Services: Understanding the Scope and Impact of Services Outsourcing", Institute for International Economics Working Paper No. 05-9 SSRN 803906
  • Mark Kobayashi-Hillary, 'Who Moved My Job?' (2008). ISBN 978-1-4092-7107-9.
  • Mark Kobayashi-Hillary, 'Building a Future with BRICs: The Next Decade for Offshoring' (Nov 2007). ISBN 978-3-540-46453-2.
  • Mark Kobayashi-Hillary & Dr Richard Sykes, 'Global Services: Moving to a Level Playing Field' (May 2007). ISBN 978-1-902505-83-1.
  • William Lazonick, Globalization of the ICT Labor Force, in: The Oxford Handbook on ICTs, eds. Claudio Ciborra, Robin Mansell, Danny Quah, Roger Solverstone, Oxford University Press, (forthcoming)
  • Arie Y. Lewin and Vinaj Couto, Next Generation Offshoring: The Globalization of Innovation Offshoring Research Network 2006 Survey Report.
  • Mario Lewis, IT Application Service Offshoring: An Insider's Guide, Sage Publications, ISBN 0-7619-3525-8, ISBN 978-0-7619-3525-4
  • Catherine Mann, Accelerating the Globalization of America: The Role for Information Technology, Institute for International Economics, Washington D.C., June 2006,[18] ISBN paper 0-88132-390-X
  • Stephan Manning, Silvia Massini and Arie Y. Lewin, "A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent", in: Academy of Management Perspectives, Vol. 22, No.3, October 2008, 35-54.[2]
  • Stephan Manning, Joerg Sydow and Arnold Windeler, "Securing Access to Lower-Cost Talent Globally: The Dynamics of Active Embedding and Field Structuration", in: Regional Studies, Forthcoming (2011).[7]
  • McKinsey Global Institute; "Offshoring: Is It a Win-Win Game?", August 2003
  • Bharat Vagadia, "Outsourcing to India: A Legal Handbook", August 2007, Springer, ISBN 978-3-540-72219-9
  • Atul Vashistha and Avinash Vashistha, The Offshore Nation, ISBN 0-07-146812-9
  • Wolfgang Messner, "Intelligent IT Offshoring to India. Roadmaps for Emerging Business Landscapes", Palgrave Macmillan, ISBN 978-0-230-24626-3
  • Toledo Mario, "Outsourcing and Offshoring:Companies and governments immerged in a complex environment" a Research Project for Global Innovation at Hamburg University of Technology, August 2007, [1]

[edit] References

  1. ^ "The Offshoring of American Government", Cornell Law Review, Nov. 2008, available: http://www.lawschool.cornell.edu/research/cornell-law-review/upload/Zuckerman.pdf
  2. ^ a b c "SSRN-A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent by Stephan Manning, Silvia Massini, Arie Lewin". Papers.ssrn.com. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1287369. Retrieved 2010-05-22.
  3. ^ See "Appendix II: Definitions of Offshoring" in General Accounting Office: "International Trade: Current Government Data Provide Limited Insight into Offshoring of Services", September 2004. Imported intermediate goods are included in offshoring in "Swenson, D: "International Outsourcing", in "The New Palgrave Dictionary of Economics", 2008.
  4. ^ Fishman, T: "China, Inc." Scribner, 2006.
  5. ^ Working Through Outsourcing: Software Practice, Industry Organization and Industry Evolution in India Kyle Eischen. eScholarship Repository, 2006. Retrieved 25 November 2006.
  6. ^ Bangalored
  7. ^ a b c "SSRN-Securing Access to Lower-Cost Talent Globally: The Dynamics of Active Embedding and Field Structuration by Stephan Manning, Joerg Sydow, Arnold Windeler". Papers.ssrn.com. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1753212.
  8. ^ Workforce Management Online, Dec 2007
  9. ^ "The 10 Top Pitfalls of Offshoring". http://www.twago.com/blog/2010/01/18/the-top-10-pitfalls-of-offshoring/. Retrieved 2 February 2012.
  10. ^ Focus and strategy in Offshoring, Clairvolex, Jan25,2010
  11. ^ Ernest H. Preeg (May 1, 2002). Testimony on Chinese Currency Manipulation Manufacturers Alliance
  12. ^ IT Employment Reaches Record High In U.S. - IT Employment At Record High - InformationWeek
  13. ^ U.S. Tech Workers In Hot Demand Despite More Outsourcing - Outsourcing Blog - InformationWeek
  14. ^ Myths and Realities: The False Crisis of Outsourcing
  15. ^ a b "Samuelson: Debunking the Great Offshoring Myth". Newsweek.com. 2007-08-21. http://www.newsweek.com/id/34690. Retrieved 2010-05-22.
  16. ^ General Accounting Office: "Offshoring: U.S. Semiconductor and Software Industries Increasingly Produce in China and India", September 2006.
  17. ^ a b c Sara Baase, "A Gift of Fire: Social, Legal, and Ethical Issues for Computing and The Internet. Third Ed. 'Work'" (2008)
  18. ^ "Accelerating the Globalization of America: The Role for Information Technology - Catherine L. Mann, Jacob Funk Kirkegaard, Peter G. Peterson Institute for International Economics". Bookstore.iie.com. 2010-03-25. http://bookstore.iie.com/merchant.mvc?Screen=PROD&Product_Code=3900. Retrieved 2010-05-22.

[edit] External links

[edit] News

[edit] Research

[edit] Internet articles

Contributed by Bhoyy Jalloh in the Opinion section of the Concord Times in Freetown, South Africa. Reprinted with permission from allAfrica.com. Copyright © 2007 allAfrica.com. All rights reserved.

To read another Global Envision article about the IMF and the World Bank, see The IMF and World Bank - An Overview.

- forcing competition
- opportunities for small companies
- sustainable development
- worldwide protests against globalization
- growing power of MNCs
- OECD Guidelines for MNCs
- specific consequences
- globalization and the environment
last updated 2010 Jan 14
see witiger.com/internationalbusiness/globalizationSustainableDevelopment.htm
see witiger.com/internationalbusiness/globalization-soverignty-issues.htm
see witiger.com/internationalbusiness/globalization.htm
see witiger.com/internationalbusiness/globalization-reverse.htm
including material from
Global Business Today, 2nd Ed.
Hill, McKaig ... and Richardson
ISBN-10: 0-07-098411-5
.... online learning centre of the publisher
The debate over the positive and negative effects of globalization is a hot topic for many individuals, agencies, organizations and government departments who find themselves in a position to defend or attack the current globalization trends. We can have an interesting debate in class about the merits of globalization but in the end, whether we like it or not, it is a situation we have to deal with.
OBJECTIVES After reading this online unit, and attending the lecture, the student will
o be able to define what globalization means in the context of int'l business
o understand the effects of globalization in terms of corporate competitiveness
o be able to define U.S. and Canadian differences in opinion on the issue of globalization
o know some of the positions that entities have on the "pro" and "con" side
o be aware of some of opportunities, and challenges, facing SMEs dealing with globalization
o be able to explain how globalization effects sustainable development
o be aware of some of the issues in the worldwide protests for, and against globalization
o be able to explain how globalization effects social justice in some effected regions
o understand how the global activities of large companies may effect national sovereignty
o know some specific examples of the effect of globalization on business in Canada
. The economic "disclocation" of the North American economy in 2008-2009 has created substantial "ripples" which have effected, and are effected by the economic upheavals in Asia (North America's largest trading partner) and Europe.
One thing that has become "evident" from the results of the North American economic problems is that
  • the economy of Asia's exporters has been effected by
    • reduced North American consumption
    • and consequently reduced North American importing
- this "reaction" seems to substantiate claims that Globalization is indeed intense.

.. "The great challenge facing political leaders today is to persuade the public that continuing to liberalize trade will bring more benefits than costs. Distrust of globalization has probably never been higher in the past 60 years....China and India are among the reasons. There is widespread fear that globalization means job losses and lower wages as the export power of these huge nations grows. So countries are becoming more protectionist, more unwilling to deal with change and make adjustments."
David Crane
well known economics and int'l trade journalist for The Toronto Star 2006 Dec 31
Definition of Globalization
o People around the globe are more connected to each other than ever before.
o Information and money flow more quickly than ever.
o Goods and services produced in one part of the world are increasingly available in all parts of the world.
o International travel is more frequent.
o International communication is commonplace.
This phenomenon has been titled "globalization."
From Keith Porterhttp://globalization.about.com/cs/whatisit/a/whatisit.htm
The term "globalization" describes the increased mobility of goods, services, labour, technology and capital throughout the world.
"Globalization is a term for the horizontal and vertical integration of manufacturing and trade on an international level"
Globalization, an example in the forest products industry
click to view large wallpaper size
The vertical integration of the wood products industry "is probably the single most recognized characteristic of the industry" -- for example, most paper sales are by corporations which also control timberland. Now the horizontal integration of the industry is also being completed, as corporations like International Paper spread their operations to dozens of countries."
www.endgame.org/gtt-globalization.html 1.
The reason why we emphasize the forest products industry in a Canadian course on International Business is
  • historically
    • it was the rich forests of Canada which were one of the big incentives for European explorers to investigate the waterways of our country as a way to ship back logs to Europe for the French and British navy.
  • currently
    • the forest products industry
        • exporting paper
        • exporting pulp
        • exporting dimension lumber
        is the biggest industry by dollar amount, and volume, in Canada
Forestry trade
"The effects of deforestation have been known since ancient times. Empires from Roman to colonial times have expanded to acquire wood supplies for shipbuilding and fuel for industry, and have collapsed when those wood supplies were depleted. The post-World War II ascendancy of U.S. timber corporations has brought the industry to new heights, and promises to take it to new lows as well. The global timber industry has tried to escape the ecological limits to raw materials, and the social and economic limits to markets, by relying on frontiers. While multinational timber corporations use the rhetoric of sustainability and jobs, the centuries-old reality of cut and run continues. Despite the public relations strategies of the corporations, timber industry overcutting has been confirmed by numerous industry, academic, and government studies. Now that the end of the forest frontier is being reached, free trade agreements are threatening to remove the last barriers to total industrialization and depletion."
by George Draffan, Public Information Network, Seattle
permission to quote Draffan received in an email Oct 11th, 2002. Copies of emails kept in the permissions binder
."Globalization forces everyone to compete with the cheapest producers."
see youtube.com/watch?v=YFVzjLqZj7g&feature=related
Italy's 'Made in China' Label
Is this a good thing or a bad thing?
"In the early 1990s, bleached hardwood pulp cost
  • $78 per ton to produce in Brazil,
  • $156 per ton to produce in eastern Canada, and
  • $199 per ton to produce in Sweden."
- therefore the cutting down of the rainforest in Brazil !
by George Draffan, Public Information Network, Seattle
Globalization of Markets / Customers
Globalization of Production
Globalization of Government and NGOs
as discussed in Hill / McKaig Global Business Today, 2nd Ed.

Chpt 1
The Globalization of Markets / Customers
Globalization of markets refers to the "merging of historically distinct and separate national markets into one huge global marketplace"
For some products and services "the tastes and preferences of consumers in different nations are beginning to converge on some global norm" - a consequence of the "globalization of the customer"
Why is this happening?
  • advances in the technological environment
    • more people travelling
    • information through the web
  • blending across social - cultural environment
Stuff = ...
Industrial Services Industrial Goods
Consumer Services Consumer Goods

Chpt 1
The Globalization of Markets / Customers
"Most global markets are not for consumer products ... but markets for industrial goods and materials that serve a universal need the world over".
Industrial Services Industrial Goods
Consumer Services Consumer Goods

Chpt 1
The Globalization of Markets / Customers
Industrial Services Industrial Goods
Consumer Services Consumer Goods
A tricky concept
One the one hand, there is an increasing tendancy for consumer product companies to narrow their "target market segmentation" for certain types of consumer products and services, - this helps achieve very large economies of scale which drive down the price of things such as consumer electronics; yet, for many things, ie cell phone ring tones, there is an increasingly diverse segmentation based on pandering to the diverse social/cultural market.
"While modern communication and transportation technologies are ushering in the 'global village', very significant national differences remain in culture, consumer preferences, and business practices. A firm that ignores differences between [nations] does so at its peril"

Chpt 1
The Globalization of Production
Globalization of production refers to the "sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital"
Why is this happening?
  • advances in the technological environment and regional advantages and variances in the economic environment have allowed for transportation of larger volume goods over longer distances
    • bigger stuff travelling farther
    • technology effecting information/communications
        • it is possible to "know" where to buy components parts at cheaper prices
  • the "modular: aproach to manufacturing - few things "made" in a factory, most stuff is assembled from component parts that come from a variety of locations, some national, some international
. The Globalization of Production
Erosion of "national identity" associated with a branded consumer product.
Given the diverse origins of component parts, it becomes increasingly challenging to say a complex consumer product (such as a large TV, computer or car) is predominantly from "X" country.
Influences of, and changes in, the
  • economic environment
  • competitve environment
  • technological environment
have resulted in Supply Chain Management solutions that source parts all over, based on the lowest price and fastest deliverly time.
Example: One particular model of a consumer branded electronic product may have internally three different battery pack arrangements, depending on how the supply chain people sourced the parts at the time a long production run was being carried out - some may come from Korea, some may come from China or Taiwan.
When large companies establish extremely large production runs, supplier companies sometimes cannot meet the volume of requirements so supply chain staff source from multiple locations.

Chpt 1
The Globalization of Government / Emergence of Global Institutions
WTO - World Trade Organization
IMF - International Monetary Fund
United Nations
World Bank
As companies grow from national to trans-national organizations, we have seen an emergence of institutions needed to "help manage, regulate and police the global marketplace".

Chpt 1
The Globalization of Government / Emergence of Global Institutions
decline in trade barriers (as encouraged by WTO and IMF)
advances in the "technological environment"
- which effects
  • communications, WWW
      - we can be in touch with more people, in more complex ways
      - globalization of TV and entertainment
        - blends differences between cultures
        - allows "immigrant cultures" to remain viable
  • information processing
      - allows for more complex decision making
      - relates to facilitating banking transactions globally
      - provides capability to know more detail about customers (CRM)
  • transportation
      - people, - global travel facilitates global business
      - contanerization; products, supplies
. The Globalization of Government / NGO's
Regional and national governments are increasingly "sensitive" to circumstances happening outside their national borders.
For example the ability of a government to raise money selling bonds depends not just on the citizens buying, but also institutional investors in other countries, which in turn allows the gov't to use deficit financing for domestic projects.

is good !!
from the front page of the National Post, July 9th, 2002
"Globalization Cures Poverty: Study"
is the title of a story by Jan Cienski which cites that "Free markets credited with reducing misery - yet the gap between rich and poor widens"
Cienski says "Many globalization critics are "poorly informed about the historical record, and appear not to be aware of the contribution played by globalization in the struggle against poverty," the study's authors say."
Cienski makes the interesting point that "Improved communications has had the perverse effect of undermining the case for globalization because "the poor that remain, though a shrinking proportion of the whole population, are more than ever aware of their relative deprivation."
is good !!
the study, referred to in the Cienski article, was by the London-based
Centre for Economic Policy Research.
Instead of relying on the Canadian newspaprs interpretation, we can use the resources of the Internet to go direct to the CEPR webpage and get direct information about this globalization study
the CEPR has a press release on their study released in July 2002 and you can read it at www.cepr.org/press/PP8.htm
is good !!

is good !!
" the authors of the new CEPR Report find that many of the charges levelled against globalization are misguided:" - they list several points on their website which deserve reading.
  • "There is a wealth of economic evidence that demonstrates that globalization brings great benefits as well as costs. It offers the opportunity for a higher rate of sustainable growth - growth that translates into longer, healthier lives and improved living standards.
  • On average, economic growth is good for the poor, and trade is good for growth. Trade is also associated with lower inflation and less corruption. A significant degree of openness to trade, financial liberalization, and global financial integration are necessary conditions for sustained economic growth.
  • The increasing integration of the world's economies does not inevitably increase the inequality of incomes. The 19th century saw an explosion of inequality but by the middle of the 20th century it had stopped rising. The proportion of the world's population in absolute poverty is now lower than it has ever been. The number of those living on less than 1$ a day, adjusted for inflation, has declined from around half in 1950 to less than a quarter in 1992.
  • Many of the apparent costs of globalization reflect domestic policy failures, to the extent that they would be better tackled through domestic policy reform than through seeking to halt the forces driving globalization.
    There is little evidence that governments are losing power to multinational corporations or that there is 'a race to the bottom' in environmental standards or taxation."
is good !!
David Crane explained in a Dec 2006 article titled
"Don't discount the positive side of globalization"
"Canada's clothing industry provides a good example of the trade-off that comes when a country lowers its trade barriers as Canada has done with clothing. According to Statistics Canada, production by Canada's clothing industry fell from $7.9 billion in 2000 to $5 billion in 2005, a 37 per cent decline. Employment fell by 34,000 to 60,000, a 36 per cent fall in the number of clothing industry jobs.
About 70 per cent of this decline was due to a loss of share in the Canadian market to imports from China, Bangladesh, India, Mexico and other developing countries, while 30 per cent of the decline was due to a fall in exports to the U.S. as developing countries displaced Canadian shipments.
So trade liberalization has meant a loss of jobs and output in Canada's clothing industry, though the Canadian companies that have survived have become more innovative and productive. But it has also meant cheaper clothing for Canadians. This matters, especially to low-income families and seniors living on fixed incomes. "
Globalization and SME's
"Globalization and the Internet have created unprecedented opportunities for small and medium-sized businesses in Canada"
is the title of a Sept 2002 story by Lopez-Pacheco
There are a lot of stories in some media that discuss how Globalization is challenging [read difficult and painful] for small and medium sized enterprises because they are being forced by the competitive environment to sell product and services to their customers, at lower prices ; cause - if they don't, some vendor in another part of the world will steal away their customers. However with every challenge, there are also opportunities - in some situations, the consequences of globalization can be a benefit for SME's cause the "shrinking world" [ facilitated by the developments in the technological environment] can bring more opportunities to SME's that previously they could not deal with. Therefore we have included in this section on Globalization a story from the National Post about how "Globalization and the Internet have created unprecedented opportunities for small and medium-sized businesses in Canada".
National Post, September 23, 2002 by Alexandra Lopez-Pacheco
The key thing about this story is that one of the ways small and medium sized companies are dealing with opportunities afforded by globalization is to be bigger companies !!! - and this can be affected through using strategic alliances.
"Globalization and the Internet have created unprecedented opportunities for small and medium-sized businesses in Canada -- an environment where competition is fierce. To take advantage of these opportunities, while avoiding some of the competitive obstacles often faced by the little fish in the big ocean, many of these businesses are forming partnerships or, more precisely, strategic alliances. "There are various advantages to forming strategic alliances," says Estelle Metayer, president of Montreal-based Competia Inc., a leading competitive intelligence and strategic planning company and publisher of Competia Online. "One is the ability to penetrate markets that would be too costly to develop on your own. For example, if you form an alliance with an American partner who can take on your products and distribute them through their network, you could save a lot of money on the marketing side." Another big advantage comes from joining forces with a business that can provide your enterprise with access to expensive technology you might not be able to afford otherwise. Management-based strategic alliances are also advantageous, Ms. Metayer says. "Often, smaller companies don't have big management teams. So if they need someone who has a certain expertise, but they really can't afford to hire such a person, then they can form an alliance with a company that has that management expertise."
"Strategic alliances also benefit the big companies. "With large corporations, one of the problems often is the inability to move quickly, because of bureaucracy and more complicated internal politics. Smaller companies are able to react more quickly to changes in the marketplace. So from both parties' perspectives, it serves their needs," he says. Although the concept of a strategic alliance can sound so appealing to a struggling small business that they might be tempted to run out and get one, experts warn businesses should not rush into partnerships, especially if another company comes courting."
Globalization, the development of strong, and sustained protests worldwide
By mentioning the worldwide growing protests movement against aspects of globalization, we are not endorsing the violence by which the protestors are conveying their message - we are recognizing that it has become an issue and some consequences are effecting international business management.
The screen capture below comes from a newspaper article following the G8 Summit in Genoa in July 2001 - which was a particular noteworthy event due to the large organized scale of the anti-globalization forces, and the fact the police countered with lethal force.
"This is the anti-globalization movement. Sprawling, disparate, powerful. A political force unto itself that, given its international scope and staggering number of participants, is unprecedented in history. And, it would appear, at a significant crossroads."
Vinay Menon
Menon makes reference to Seattle, saying that "... Seattle, where approximately 60,000 protesters from all political, social and environmental persuasions managed to shut down a meeting of the World Trade Organization. Once perceived as staid centres of international bureaucracy, the WTO, as well as the World Bank and International Monetary Fund (IMF), are now targets of anti-globalization activists, who regard these institutions as murky cabals - unaccountable, undemocratic and unwitting facilitators of the corporate agenda."
Menon, noting comments from Ronald Deibert, a political science professor at the University of Toronto, says that "....another challenge anti-globalization protesters face: Many members of the public can't grasp the abstract, socio-economic principles upon which the movement is based. So critics start dismissing groups as "militant radicals," "Yuppie freaks," "Hippie wannabes," "flat-Earth advocates," "neo-Marxists," "neo-Luddites" and "anti-capitalist pipe dreamers."
Even the term "anti-globalization movement" is misleading. There is no formal structure, no hierarchy. No one leader. No one platform. For some, there isn't even an "anti" - they believe it's not a question of "if we globalize," but how. There are, instead, widely different groups, with widely different agendas. And these groups will only get bigger and more effective".
Globalization, social justice issues - commentary by David Crane - Article 1
Whether or not one agrees with the "social justice issues" being evangelized by some special interest groups - it must be aknowledged that these opinions are increasingly being expressed in many circles and it would be responsible for us to review what these people are trying to communicate.
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_PrintFriendly&c=Article&cid=1006211060939 David Crane writing in The Star
2001 Nov 20th
"Globalization can't ignore social justice"
Crane's article refers, in part, to the G-20 meetings in Ottawa in mid-November 2001
Crane quotes some of the key figures at the event.
"As Gordon Brown, Britain's chancellor of the exchequer and chairman of the IMF and World Bank weekend meetings, said, "The real issue is not whether you are for or against globalization, because globalization is moving forward. The real issue is whether you are for or against social justice on a global scale, and I believe there is an increasing recognition that we have to work together to make the world and the global economy a better place for the world's poor." According to World Bank president James Wolfensohn, "in the next 30 years, the population of the world will increase from 6 to 8 billion, and virtually all of those 2 billion additional people will live in the developing world. The sooner we are able to grasp the implications of this, the better."
Crane further quotes Wolfensohn adding ""Some form of globalization is with us to stay," Wolfensohn said. "But the kind of globalization is not yet certain: it can be either a globalization of development and poverty reduction - such as we have begun to see in recent decades, although this trend still cannot be taken for granted - or a globalization of conflict, poverty, disease, and inequality." Our huge task is to tip the scales toward good globalization."
So, one of the reasons we discuss globalization and social justice issues is that it relates to issues of stability or instability which in turn are part of the concerns about risk and threat situations for international business in developing economies..
Globalization, social justice issues - commentary by David Crane - Article 2
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_PrintFriendly&c=Article&cid=1006211060939 David Crane writing in The Star
2003 Feb 9th
"Putting a human face on Globalization"
Crane's article refers, the OECD - which we discuss in this course + the Canadian Federal Government web site of Canada's National Contact Point for the OECD Guidelines for Multinational Enterprises www.ncp-pcn.gc.ca/menu-en.asp
click to see where Zambia is on the map of Africa
click to see Zambia
Crane writes "When a group of Zambian farmers faced eviction by a Canadian mining company from lands they were using, they were able to get help in Canada. They were able to remain on the land for some further time as a result of a code of responsible corporate behaviour developed by the Organization for Economic Co-operation and Development in Paris. The guidelines for multinational enterprises were adopted by the OECD in 2000, and since then have become an important way of holding multinational corporations to a set of core standards of behaviour."
" In the process, they have provided companies operating internationally with a set of standards that lets hem know how they should perform. In the case of the Zambian farmers, they were able to enlist the help of Oxfam Canada, which went to Canada's National Contact Point for the guidelines — each OECD country has to maintain such a contact point where complaints can be raised — and a dialogue was launched. The TSE-listed company, First Quantum Minerals Ltd. of Vancouver, agreed to allow the Zambian farmers to stay on the land, though not permanently."
click to see get to OECD site
from the OECD site
"The OECD Guidelines for Multinational Enterprises are non-binding recommendations to enterprises, made by the thirty-seven governments that adhere to them. Their aim is to help Multinational Enterprises (MNEs) operate in harmony with government policies and with societal expectations."
Crane explains that "The guidelines, which can be found at http://www.ncp-pcn.gc.ca, cover corporate disclosure, employment and industrial relations, the environment, bribery, consumer protection, science and technology, competition, and taxation. They represent not a bad summary of what should be standard corporate citizenship and ideally would be taught to all MBA students."
Crane also adds that "the [OECD] guidelines are of value to the International Monetary Fund and the World Bank in their own dealings with developing countries and international corporations." The point being that companies in contravention of the guidelines cannot be participants in IMF and World Bank projects.
Crane's article is helpful because it ties in Globalization with social justice issues in a real context, and also shows the links to OECD, IMF and World Bank issues.
Globalization, social justice issues - commentary by David Crane - Article 3
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_PrintFriendly&c=Article&cid=1006211060939 David Crane writing in The Star
2004 Feb 25th
"Globalization is not the Enemy"
Crane's article refers to an article written by John Saul - husband of the Governor General. In this article, Saul suggests Globalization is bad and Crane counters by explaining that Saul's interpretation is flawed.
Crane argues "Saul's thesis is that globalization is essentially dead, and deserves to be dead because it has been nothing more than an assault on society and the environment by narrow corporate interests. If that were true, then he would have a case. But of course globalization is much more complicated than Saul's gross oversimplification. For him [Saul], globalization is a world in which global markets leave the nation-state powerless to look after the needs of its citizens.
But there are many concepts of globalization. And while there are some who argue and even advocate the end of the nation-state, more serious discussion of globalization is about how we can create a more prosperous global community, with fairer sharing of the wealth, while sustaining the environmental health of the planet, thwarting international crime and terrorism, and doing all of this in a way that takes into account the views and concerns of people everywhere.
The fundamental problem is that Saul does not seem to understand what globalization is really about. His quarrel should be with neoconservatism and market fundamentalism, not globalization. It is the neoconservatives, the market fundamentalists that have done damage, and they have done it both at the global level and within the nation-state. The challenge we face is to sustain globalization in a more human form, not to promote its collapse. More than ever we will need stronger global rules and institutions if we are to have a stable world in which population could increase 50 per cent by the middle part of this century. We will also need more international trade and investment if the world's poor are to be lifted out of poverty."
Globalization and poverty
contact was made with the World Bank head office June 9th, 2005 for the purposes of obtaining permission to use this screen capture. Copies of emails kept in the permissions binder
if you are interested, here is the site where you can read the entire text of the
World Bank, World Development Report 2000
Globalization, big companies forcing small companies to compete at an unfair level
How Canadian
Tire's overseas sourcing
led to a Canadian icon
losing business
Woods Canada Limited was founded in 1885 and has been a well known Canadian manufacturer of outdoor clothing and equiment.
They were most famous for good quality sleeping bags which they made in Canada (in Toronto) right up til 2005
As explained by the president of Woods, David G. Earthy,
a significant part of Woods business was supplying Canadian Tire - in fact the two companies had a supplier - retailer relationship more than 80 years.
Earthy explained Woods had to shut down operations following "...a decision by the Company's largest customer, Canadian Tire, to discontinue purchasing domestically manufactured sleeping bags."
It has been suggested by others in the industry that Canadian Tire (facing competition from Wal-mart and other big vendors of camping equipment) had to further cut costs and was simply geting cheaper sleeping bags from suppliers in China.
How Walmart's low price policy was accused of shutting down a
North American manufacturing company
An example of North American workers losing jobs to cheaper labor overseas
Schrade is (was) a very old family based American manufacturing company that made, since 1904, a limited range of folding knives and fixed blade knives for decades at their factory in the small town of Ellenville in New York state.
Some of their product line can still be seen at
Like many small and medium sized manufacturers, Schrade was flattered when Wal-mart expressed interest in buying their product - the obvious consequence was that Schrade would be able to manufacture in larger numbers and have a better chance of staying in business in a competitive marketplace.
Over a period of time, Wal-mart became Schrade's largest customer to the point where 80% of Schrade's product was going to the large discount chain.
Then, Wal-mart squeezed Schrade by asking them to compete with low priced knives they were beginning to source in China. Schrade could not match the very low price from China so Wal-mart abruptly cut their business with Schrade. Faced with the loss of its largest customer, Schrade crashed in 2004 barely reaching the 100th anniversary of the founding of the company before all its assets were sold at auction as it was forced in bankruptcy.
There are a number of "walmart sucks" sites on the web that have this story recounted by walmart insiders, and other similar tales, check http://www.freewebs.com/wallmartsucks/
American public opinion is, in the majority, negative towards Globalization. Canadians are even further effected, on an individual basis, by international trade since a higher proportion of Canadians have jobs which are effected by international business competitiveness.

Wall Street Journal/NBC News poll found that 58% of Americans believed that trade had reduced U.S. jobs and wages, a view that is almost never expressed by commentators or those who shape public opinion. from www.cepr.net/GlobalPrimer.htm
1.There are positive and negative aspects of Globalization. Some people who champion the negative aspects are very intense in their efforts to persuade others to see their point of view.
www.endgame.org discusses the downside of competition cause by globalization.
Toward Globalization of the Forest Products Industry
David Bael and Roger A. Sedjo
Mill closures devastate Canada's forest industry

Youth rough up Miguna in Mombasa

Mombasa police boss Kipkemoi Rop (centre) talks to youth outside the Royal Castle Hotel after they disrupted Mr Miguna (not in the picture) promotional session of his book.

Mombasa police boss Kipkemoi Rop (centre) talks to youth outside the Royal Castle Hotel after they disrupted Mr Miguna (not in the picture) promotional session of his book.

Posted Saturday, August 25 2012 at 17:16

In Summary

  • Youth demand to know who was funding Mr Miguna to scuttle the PM's quest for the presidency in the next General Election.
  • Mr Miguna lost his trademark cap and a shoe as he wrestled with the attackers.

                        Former Prime Minister Raila Odinga advisor Miguna Miguna was confronted by rowdy youth during a promotional tour of his controversial book at the Castle Royal Hotel in Mombasa County.

                        Trouble broke out when the youth demanded to know who was funding him to scuttle Mr Odinga's quest for the presidency in the next General Election.

                        Mr Miguna, who was addressing would-be buyers of his book, Peeling Back the Mask: A Quest for Justice in Kenya, found himself cornered when enraged youth accosted him with blows and kicks.

                        In the ensue melee, Mr Miguna lost his trademark cap and a shoe as he wrestled with the attackers.

                        However, quick action by hotel security and six police managed to throw the rowdy youths out before locking entry points to the premises.

                        As the crowd swelled outside the hotel on the busy Moi Avenue, anti-riot police led by Kipkemoi Rop took charge and with the assistance of flying squad officers whisked the besieged author out of the hotel.

                        When told pole (sorry) by a journalist, Mr Miguna shouted back "Aluta continua the struggle is still on," before entering a flying squad car that zoomed off closely followed by another escort vehicle.

                        Earlier, Mr Miguna had criticised the PM saying he lacked the leadership qualities to be the next president.

                        He said Mr Odinga had failed to rein in corruption in his office, which "was infested with corrupt individuals".

                        Briefing the media, Mr Rop expressed satisfaction they had done their operation without resorting to force or tear-gassing the unruly mob.

                        Police whisk Miguna out of hotel as youths disrupt his book promotion

                        Jacob Owiti  | NATION Former Prime Minister Raila Odinga's adviser Miguna Miguna puts on a brave face after an attempt to market his political memoirs at a Kisumu hotel aborted on August 23, 2012.

                        Jacob Owiti | NATION Former Prime Minister Raila Odinga's adviser Miguna Miguna puts on a brave face after an attempt to market his political memoirs at a Kisumu hotel aborted on August 23, 2012. Nation Media Group

                        By JUSTUS WANGA jwanga@ke.nationmedia.com
                        Posted Thursday, August 23 2012 at 23:00

                        In Summary

                        • Raila's former adviser on coalition affairs cries foul as officers ask him to leave instead of ejecting the mobs from the venue
                        • Corruption: Mr Miguna claims in his controversial book that the Prime Minister's office is a den of corruption. He claims that senior staff in the Nairobi office engage in questionable deals to enrich themselves.
                        • Nepotism: The author claims that the Prime Minister has been using his position to appoint his relatives and friends to senior positions in government.
                        • Post-poll chaos: He claims that Mr Odinga and ODM had a hand in the 2007/08 post-election violence
                        Police whisked away author Miguna Miguna through the back gate of a Kisumu hotel on Thursday where he was on a book marketing campaign as a mob bayed for his blood.
                        The attendants of the book promotion were annoyed when the former Prime Minister Raila Odinga's aide claimed they had been reduced to "voting robots" by the ODM leader.
                        "It is sad that as a people, you have been made voting machines without subjecting your leaders to the requisite scrutiny to know what they can do for you," he had told the gathering.
                        He claimed that Mr Odinga did not mean well for the people of Nyanza.
                        The audience had struggled to listen through his first 15 minutes of the fiery address that largely discredited the ODM leader but it was the two allegations that were the final straw that broke the camel's back. Soon afterwards, hell broke loose.
                        Kisumu police boss Musa Kongoli and his deputy Muthuri Mwongera had a rough time calming the chair-wielding youths, who were surging towards the dais to attack the author of the political memoirs, Peeling Back the Mask: A Quest for Justice in Kenya.
                        The officers shielded Mr Miguna and rushed him into a different room before helping him into a police patrol car outside the hotel.
                        Anti-riot police had also assembled outside the hotel to ensure that the crowd, which was building up at the main entrance, did not cause chaos. Angry youths demanded that Mr Miguna comes out.
                        It took the persuasion of Mr Kongoli before Mr Miguna agreed to leave. According to the author, the rowdy youths were the ones who were supposed to be ejected by police for creating disharmony at his event and not him.
                        "Why do you want me to leave and clearly am the one being targeted? How about getting the few elements out to spoil the function out of the room?" he sought to know.
                        "You accuse the Prime Minister of corruption and nepotism. Did you apply for the job you were doing at his office if you were not just hand-picked?" asked an irate youth.
                        The youths accused Mr Miguna of working for Mr Odinga's political opponents to block him from succeeding President Kibaki next year.
                        Their charge was largely informed by the presence of Mr Onyango Oloo, who is the secretary-general of Mr Uhuru Kenyatta's party, The National Alliance.
                        "Today we have confirmed that you work for TNA because how else would you explain Onyango Oloo's attendance? We have no problem if they are willing to give you money but let the deal not revolve around tarnishing other people's reputation," shouted another irritated attendant.
                        Before the altercation, Mr Miguna had accused Director of Public Prosecutions Keriako Tobiko of playing to the gallery by ordering him to record a statement over his ICC claims.
                        "I heard that Tobiko was looking for me when I was away. Where is he now that am back? If his intention was to create fear in me, then he is mistaken," Raila's former aide said.
                        He said that despite the hostile reception, he would not abandon the quest to popularise his book.
                        "Miguna Miguna cannot be muzzled. If anything, such scenes only serve to energise my resolve," he
                        --- On Sat, 8/25/12, kriss maura <kmaura2@gmail.com> wrote:
                        From: kriss maura <kmaura2@gmail.com>
                        Subject: Re: [PK] Re: [uchunguzionline] Where is Oduya!
                        To: progressive-kenyans@googlegroups.com
                        Date: Saturday, August 25, 2012, 2:41 PM

                        there are some places that when you want peace -don't take the Kenyan
                        police there -may be the army but not the Kenyan police. they are
                        hated- what do you take of person who is paid by your taxes but can
                        lock you up on trumped up charges by a fellow useless Kenyan. drunk
                        youth-Luo or not plus police = trouble.

                        --- On Sat, 8/25/12, tomoreje@gmail.com <tomoreje@gmail.com> wrote:
                        From: tomoreje@gmail.com <tomoreje@gmail.com>
                        To: "Progressive Kenyans" <progressive-kenyans@googlegroups.com>
                        Date: Saturday, August 25, 2012, 1:31 PM
                        From: peter otieno <tudor20082000@yahoo.com>
                        Sender: VuguVuguMashinani@yahoogroups.com
                        Date: Sat, 25 Aug 2012 10:02:33 -0700 (PDT)
                        To: VuguVuguMashinani@yahoogroups.com<VuguVuguMashinani@yahoogroups.com>; Wakenya Google group<wanakenya@googlegroups.com>; AFRICA OPED<africa-oped@yahoogroups.com>; Youth Sector<nysa1@googlegroups.com>; Madaraka<madaraka-kenya@yahoogroups.com>; KENYA ONLINE<kenyaonline@yahoogroups.com>
                        ReplyTo: VuguVuguMashinani@yahoogroups.com
                        Cc: editor@nation.co.ke<editor@nation.co.ke>; letters eastandard<letters@eastandard.net>; Awaaz Magazine<editors@awaazmagazine.com>; East Africa in Focus<editor@eafricainfocus.com>; Kiss FM Classic FM<news@kissfm.co.ke>; Weekly Citizen<citnewspaper@yahoo.com>; Radio Rahma<radiorahma@yahoo.com>; Radio Umoja<radioumoja@gmail.com>; Radio Waumini<news@radiowaumini.org>; kenya-alternatives@googlegroups.com<kenya-alternatives@googlegroups.com>; NewVisionKenya@yahoogroups.com<NewVisionKenya@yahoogroups.com>; youthagenda<youthagendayln@yahoogroups.com>; Bunge<info@bungelamwananchi.org>; kenyaglobal-unity@googlegroups.com<kenyaglobal-unity@googlegroups.com>; mwananchi@egroups.com<mwananchi@egroups.com>; mwanyagetinge@yahoogroups.com<mwanyagetinge@yahoogroups.com>; Association KenyansinRwanda<kenyansinrwanda@googlemail.com>; kenyans for Change<info@kenyansforchange.com>; odhiambo okecth<komarockswatch@yahoo.com>; Friends of KCDN Group<friendsofkcdn@yahoogroups.com>; Standard<info@standardmedia.co.ke>; ntv@nation.co.ke<ntv@nation.co.ke>; news@nationmedia.com<news@nationmedia.com>; news@royalmedia.co.ke<news@royalmedia.co.ke>; news@1fm.co.ke<news@1fm.co.ke>; KCA Yahoogroup<kca_main@yahoogroups.com>; Kenya Community<kc-ab@yahoogroups.ca>

                        Dear Sir,

                        You may have had a bright idea and probably your message was very important to the general public about the rot that exists in the some of these offices, but the manner in which you present your case must not leave people doubting your sincerity and honesty. Initially some of us thought you had done a great job but now that you have made story political and characterized your campaign with abusive language especially on certain communities, I am persuaded that you are a project used by forces that does not want change in the status quo.

                        And as you rightly stated in Kisumu, your aim is now to provoke the people and you are happy you are making progress. Wish you all the best.


                        From: Oduya - Magunga <oduyaericson@yahoo.com>
                        To: Wakenya Google group <wanakenya@googlegroups.com>; Vugu Vugu <vuguvugumashinani@yahoogroups.com>; AFRICA OPED <africa-oped@yahoogroups.com>; Youth Sector <nysa1@googlegroups.com>; Madaraka <madaraka-kenya@yahoogroups.com>; KENYA ONLINE <kenyaonline@yahoogroups.com>
                        Cc: "editor@nation.co.ke" <editor@nation.co.ke>; letters eastandard <letters@eastandard.net>; Awaaz Magazine <editors@awaazmagazine.com>; East Africa in Focus <editor@eafricainfocus.com>; Kiss FM Classic FM <news@kissfm.co.ke>; Weekly Citizen <citnewspaper@yahoo.com>; Radio Rahma <radiorahma@yahoo.com>; Radio Umoja <radioumoja@gmail.com>; Radio Waumini <news@radiowaumini.org>; "kenya-alternatives@googlegroups.com" <kenya-alternatives@googlegroups.com>; "NewVisionKenya@yahoogroups.com" <NewVisionKenya@yahoogroups.com>; youthagenda <youthagendayln@yahoogroups.com>; Bunge <info@bungelamwananchi.org>; "kenyaglobal-unity@googlegroups.com" <kenyaglobal-unity@googlegroups.com>; "mwananchi@egroups.com" <mwananchi@egroups.com>; "mwanyagetinge@yahoogroups.com" <mwanyagetinge@yahoogroups.com>; Association KenyansinRwanda <kenyansinrwanda@googlemail.com>; kenyans for Change <info@kenyansforchange.com>; odhiambo okecth <komarockswatch@yahoo.com>; Friends of KCDN Group <friendsofkcdn@yahoogroups.com>; Standard <info@standardmedia.co.ke>; "ntv@nation.co.ke" <ntv@nation.co.ke>; "news@nationmedia.com" <news@nationmedia.com>; "news@kissfm.co.ke" <news@kissfm.co.ke>; "news@kissfm.co.ke" <news@kissfm.co.ke>; "news@royalmedia.co.ke" <news@royalmedia.co.ke>; "news@1fm.co.ke" <news@1fm.co.ke>; Radio Waumini <news@radiowaumini.org>; KCA Yahoogroup <kca_main@yahoogroups.com>; Kenya Community <kc-ab@yahoogroups.ca>
                        Sent: Saturday, August 25, 2012 7:44 PM

                        A STATEMENT BY MIGUNA MIGUNA, SATURDAY AUGUST 25, 2012
                        I am issuing this statement from the Moi International Airport, Mombasa at 7:30pm with a broken heart but a determined and unflinching focus; a focus for the full and undiluted realization of our rights and freedoms enshrined and entrenched in the Constitution; the right and freedom to think, to express ourselves and to associate with whomsoever we want as long as these are expressed in a peaceful and legal manner.

                        A few hours ago, a marauding and organized gang of Prime Minister Raila Odinga's supporters sent to my book tour event at the Castle Royal Hotel in Mombasa forcefully entered the event after it had started and violently disrupted it, assaulted me and members of my book tour team and caused serious physical and financial damage. This barbaric attack was both unprovoked and unjustified.

                        I therefore take this earliest opportunity to condemn it unreservedly in the strongest terms possible. I challenge the Goons' Captain and Commander, Prime Minister Raila Amolo Odinga, to act as a statesman and recall his hooligans!

                        The second liberation was anchored on the realization of a new constitutional order and practice. When we were fighting for, were detained, tortured and persecuted during the dark totalitarian reign of terror, our intention was to broaden and deepen the democratic space; not to shrink it.
                        We were fighting for and suffered humiliating treatment, harassment, indignity, and other gross violations of our human rights in order to create an open, tolerant and egalitarian society governed by the Rule of Law.

                        For more than two decades, freedom fighters like Jaramogi Oginga Odinga, Markhan Singh, Achieng' Oneko and Kaggia endured inhumane treatment and sacrificed so that we can live in relative peace, prosperity and in a thriving democracy.

                        The new Constitution was not for one man; it was for all of us. We did not fight for it so as to elevate Raila Odinga to the presidency of this country. While Raila Odinga is free to roam the countryside, towns and cities, he has obviously directed, organized and authorized his hooligans to subject me to inhumane treatment; to harass me and to deny me my rights of thought, movement, expression and association.

                        When Raila Odinga's thugs force their way into the county meetings I am holding to promote my book, Peeling Back The Mask: A Quest For Justice In Kenya; to discuss national issues such as the extremely high and intolerable unemployment among our youth, the prevailing tribalism, nepotism and runaway corruption not just at the Prime Minister's Office, but also in other government institutions; Raila Odinga inexplicably feels personally threatened. Instead of responding coherently to the book and my open challenge regarding corruption at his office, his response is to send marauding goons after me.

                        Unfortunately for him, many of us are determined to live according to the dictates of the new Constitution. We have resolved to subject all public servants, including Raila Amolo Odinga, to searing vetting and interrogation. We shall not be cowed, intimidated and muzzled.

                        Raila Odinga and his goons must respect the supremacy of the Constitution. He is not above the law.

                        Make no mistake about it: I will not be intimidated and muzzled by anyone, including Raila Odinga!

                        Raila Odinga will not ascend to the presidency of this country through intimidation, threats, mayhem or through his goons!

                        We shall meet all the merchants of impunity head on.

                        I will continue my county book tour. My next stop is Nyeri on Monday August 27th, 2012.

                        Thank You.

                        God bless you! God bless Kenya!
                        MIGUNA MIGUNA
                        Moi International Airport, Mombasa
                        August 25th, 2012

                        --- On Sat, 8/25/12, Faiza Hassan <antihongo@gmail.com> wrote:
                        From: Faiza Hassan <antihongo@gmail.com>
                        Subject: Re: [PK] Happy to see non luos ask Miguna Tough Questions
                        To: progressive-kenyans@googlegroups.com
                        Date: Saturday, August 25, 2012, 2:31 PM


                        On Sat, Aug 25, 2012 at 11:23 AM, Lee Makwiny <amosogal@gmail.com> wrote:
                        I just love what i have seen.

                        From now on, miguna is not invited in Nyanza. Thanks to Warsoma, Roz and Oduya.

                        --- On Sat, 8/25/12, Kuria-Mwangi <kjmwangi@gmail.com> wrote:
                        From: Kuria-Mwangi <kjmwangi@gmail.com>
                        Subject: Re: Fw: [PK] MIGUNA ATTACK: MOMBASA IS NOT KISUMU, BE WARNED !
                        To: wanakenya@googlegroups.com
                        Cc: "uchunguzi online" <uchunguzionline@yahoogroups.com>, "changemombasa2012@yahoogroups.com" <changemombasa2012@yahoogroups.com>, "KOL" <kenyaonline@yahoogroups.com>, "progressive-kenyans" <progressive-kenyans@googlegroups.com>
                        Date: Saturday, August 25, 2012, 1:45 PM

                        Milli and Warsama:
                        Lets hear what Oloo said about the violence in Mombasa. None of you were eye witnesses so keep quiet both of you and listen to OO in his own words:

                        Saturday, August 25, 2012

                        Pro-ODM Goons Physically Attack Miguna in Mombasa

                        A LIVE REPORT BY Onyango Oloo in Mombasa

                        It is 12:55 pm on Saturday, August 25th, 2012.

                        I am sitting in the Kilindini room, located on the fourth floor of the Castle Royal Hotel where a couple of hours ago the 120 capacity space was three quarters full of members of the public who came for the Mombasa launch of Miguna's Peeling Back the Mask.

                        At the front was myself, acting as MC, Mvita MP, Najib Balala and Miguna Miguna.

                        I kicked off the meeting with the usual overview, clarifying once more for the benefit of the media that I was NOT and has never been my namesake who is Secretary General of TNA. I went into a historical overview of the Kenyan struggle for democracy and justice and lauded the promulgation of the constitution as an important breakthrough for the country's development. Before inviting Miguna to speak, I reminded the audience of the Bill of Rights and the need for all Kenyans to practice tolerance and peaceful coexistence. I then told them how the programme with unfold with Najib Balala following me to greet the crowd and then Miguna would take the podium to make his address following which the floor would be opened for a question and answer session.

                        That is exactly what happened. Miguna echoed my message of the need for peaceful dialogue and debate, going as far as underscoring that the Prime Minister himself has gone on record to defend these freedoms have served eight years in detention without trial. He then took the audience through an overview of his book which he said was "99.9%" about his life, emphasizing that Peeling Back the Mask was NOT written with the express intention of castigating any particular individual. He implored the participants to take time to actually read the book before rushing to conclusions. He cited the issues raised in the book including unemployment, corruption and other socio-economic ills and political malfeasance.

                        He then sat down after thanking the audience for listening to him to the end.

                        I then stood up, announcing it was now time for the Q& A, saying that one was free to ask a question, make a general comment or simply make any kind of intervention.

                        Several hands quickly shot up. I chose six. I told them to each remember their "number" to keep an orderly sequence and implored the rest not to interrupt each other when one was asking a question or making a comment.

                        The first heckler, a twentysomething woman who I later learned was called Eva and had spent one a half years behind bars on a drug offence, wearing a white Gor Mahia top made her first appearance heckling at nobody in particular, I reassured her that she would be among the first in the second round of questions. She piped down, seemingly mollified by my calm reassurance. Several voices in the audience also loudly asked her to be patient.

                        All six asked their questions. A certain percentage of the questions were directed at Najib Balala who was criticized for going silent; castigated for using the Wapwani vs. Wabara ethnic card and for abandoning ODM and Raila Odinga. Most of the questions directed at Miguna revolved around the timing of his books which some participants found fishy; why he waited until he was sacked to go public; why he deliberately mislead the Prime Minister to make questionable decisions yet he was Raila's trusted adviser; what was his agenda on the book tour-was it commercial or with a national interest; what was the justification for according top level state security; where was he when Kenyans were fighting and dying to liberate the country and other questions along the same general lines.

                        Miguna took the microphone to answer this battery of questions. As soon as he did that, a big burly dark skinned guy of middle height in a green Gor Mahia T shirt starting shouting, but more importantly moving forward towards on the dais. Within a matter of minutes they had surrounded us, caving us in, upsetting the media's microphones before flinging the table we were sitting behind to its side as they edged ever closer to Miguna. The guy in the green Gor Mahia T shirt who I made told is from the Makande area and was visibly drunk egged the others on. Even I was hassled, but I was determined to secure my lap top. I noticed that the person from Prestige handling book sales was nowhere to be seen leaving two unopened cartons of Peeling Back the Mask. I quickly corralled the Castle Royal Hotel staff who carted away the cartons.

                        Meanwhile a group of local human rights activists formed a protective cordon around Miguna as his security detail led him downstairs. One of them, Magak advised me NOT to follow Miguna downstairs. Instead he led me to a small cavern at the back of the fourth floor where I found a plain clothes officer from Mombasa's Central Police station who later identified himself to me as a Mr. Obade.

                        We later on found out that the same Mr. Green Mahia T-shirt guy went and grabbed Miguna's Muslim cap, while another hooligan managed to run off with one looted shoe- I am not sure how they managed to rip it off Miguna's foot. Unfortunately, Miguna wears size 13 and it is practically useless when it is not accompanied with the other from the other foot. The OCS has just informed me that in an altercation, Miguna's right hook connected with Mr. Green Mahia's chin knocking that drunken soccer/political hooligan senseless.

                        Through the magic of mobile telephony (voice calls, SMS) other ODM supporting hooligans and vandals quickly descended in downtown Mombasa's Moi Avenue address of the Castle Royal Hotel in matatu loads from Makupa, Makande, Tudor, Kisauni, Changamwe, Bangladesh to heckle, loot and physically attack us.

                        But by then hordes of cops in police uniform and civvies were on the scene.

                        Miguna was taken out of the hotel by members of the crack Flying Squad.

                        I understand Mr. Green Gor Mahia T-shirt was commenting to the undercover cops that he seemed to know by name:

                        "Nyinyi maafisa fanyeni kazi yenu. Mimi pia nafanya kazi yangu."

                        (TRANSLATION: "You officers do your job. I am also doing mine.")

                        Ok. I have to stop here. The cops are here to drive me out of the venue.

                        But I have a MAJOR worry.

                        And it is not for Miguna Miguna.

                        Rather it is for the Rt. Hon. Prime Minister Raila Amolo Odinga:

                        If this trend of hooliganism continues, some of the PM's enemies are going to hire trained goons to make a direct attempt to assassinate the author of Peeling Back the Mask and lay the blame squarely on these mindless heckling vandalizing hooligans.

                        Is the leadership of ODM remotely concerned about this distinct possibility?

                        Onyango Oloo
                        Mombasa, Saturday, August 25, 2012

                        PS: My thoughts are with the family, friends, comrades, supporters of the late Father John Kaiser as we commemorate the 12 anniversary of his assassination.

                        On Sat, Aug 25, 2012 at 12:50 PM, mohamed warsama <mhmdwarsama@yahoo.com> wrote:
                        MILLICENT: What can this morbid character tell me about hate speech ? Re-read Onyango Oloo's live post identifying Miguna attackers. BTW, did you know that this character at one told me he is prepared to use extra-judicial means to get his money back from you ? When he sends my mail to Kibunjia, I will send his mail like this one to Kibunjia too.
                        I dare him deny and I will prove it right here. This man is sick mentally, he has periods when his mind is plunged into darkness and he says anything that comes into his head, when his mind becomes lucid, he has no recollection of what he had said before. Presently, his mind is lucid, so he has no recollection of the abuses he made against my late mother and ex-wife.
                        Mohamed Warsama

                        Sent: Sunday, August 12, 2012 11:21 AM
                        Subject: Re: [PK] MIGUNA ATTACK: MOMBASA IS NOT KISUMU, BE WARNED !

                        Tell him

                        Sent from my BlackBerry® smartphone from Zain Kenya
                        Observe how RAO is liked everywhere from Mombasa to Kisumu. Just one Masarma hating RAO is a drop in the ocean.
                        From: Maurice Oduor <mauricejoduor@gmail.com>
                        To: progressive-kenyans@googlegroups.com
                        Cc: "uchunguzionline@yahoogroups.com" <uchunguzionline@yahoogroups.com>; "changemombasa2012@yahoogroups.com" <changemombasa2012@yahoogroups.com>; "kenyaonline@yahoogroups.com" <kenyaonline@yahoogroups.com>; "wanakenya@googlegroups.com" <wanakenya@googlegroups.com>; "africa-oped@yahoogroups.com" <africa-oped@yahoogroups.com>; "NewVisionKenya@yahoogroups.com" <NewVisionKenya@yahoogroups.com>; "kenya-can@yahoogroups.com" <kenya-can@yahoogroups.com>; "madaraka-kenya@yahoogroups.com" <madaraka-kenya@yahoogroups.com>; "siasa-kenya@yahoogroups.com" <siasa-kenya@yahoogroups.com>; "thelastwordtokenya@yahoogroups.com" <thelastwordtokenya@yahoogroups.com>; "mhmdwarsama@yahoo.com" <mhmdwarsama@yahoo.com>
                        Sent: Saturday, August 25, 2012 10:30 AM
                        Subject: Re: [PK] MIGUNA ATTACK: MOMBASA IS NOT KISUMU, BE WARNED !


                        I want to echo your sentiments. Warsama hates Amolo with so much
                        passion that if now his laptop jams on him, he will blame it on Amolo.

                        But what he does not understand is that he's crossing the line into
                        Hate Speech when he piles blame on Luos for what is happening to
                        Miguna. amolo has supporters from across the country and they are
                        unhappy with someone badmouthing their candidate.

                        Maybe we should forward some of Warsama's e-mails, especially this
                        one, to Kibunja at National Cohesion to get an opinion. Warsama writes
                        all this nonsense about Luos and get's away with it. Had he been
                        writing this about Kikuyus, all hell would break loose. He knows that
                        so he cowardly picks on Luos not knowing that he's doing Hate Speech.

                        Let's see if the Moderators of these fora will do something about Warsama.


                        On 8/25/12,
                        nnabwera@yahoo.com <nnabwera@yahoo.com> wrote:
                        > You are a Raila hater. What has he to do with Migunas tribulations
                        > Sent from my Nokia phone
                        > -----Original Message-----
                        > From: mohamed warsama
                        > Sent: 25/08/2012, 17:42
                        > To: uchunguzi online;
                        changemombasa2012@yahoogroups.com; KOL;
                        > progressive-kenyans;
                        africa-oped@yahoogroups.com; New Vision Kenya; Kenya Canada; Madaraka; Siasa
                        > Kenya; the last word to kenya
                        > Subject: [PK] MIGUNA ATTACK: MOMBASA IS NOT KISUMU, BE WARNED !
                        > I am a Mombasa-born Kenyan. It pains me deeply to learn that there has been
                        > an attack on Miguna by hired rowdy Luo youth when he tried to peacefully
                        > sell his book at Royal Castle Hotel.
                        > Mombasa people have always been peace-loving, friendly and hospitable
                        > people. Their culture going back over 1,000 years has been characterised by
                        > friendliness, tolerance of diversity of opinion and respect for opposing
                        > views.
                        > I therefore condemn this hooliganist attempt to import Nyanza-style
                        > intolerance to Mombasa politics. We are civilised in our way of politicking.
                        > We do not resort to throwing stones at our rivals. This is primitive, shenzi
                        > habit which strikes at the very roots of multiparty democracy.
                        > I sincerely apologise to Miguna Miiguna and wish to assure him categorically
                        > that wenyeji haswa wa Mombasa were not involved in this stupid act.
                        > Just before writing this, I had a brief exchange of smses with a former
                        > Mombasa councillor:
                        > He: Ikiwa jamaa zake Raila hawataki Miguna auze kitabu chake je akiwa rais
                        > itawezekana kumpinga au kumkosoa akifanya kosa ?
                        > Me: They will kill you.
                        > This barbarian incident exposes Raila Odinga's false claims to be the
                        > champion of reforms. Only last Monday in this very town of Mombasa, Raila
                        > was telling a Muslim Idd Baraza that the next general elections is a
                        > straight fight between reformers and anti-reformers.
                        > That is pure balderdash on his part. Raila is a big charlatan and phony who
                        > thrives on suppression of any contrary views in his home region of Nyanza.
                        > He and his small band of ODMers in Nyanza are still living in the 18th
                        > century whilst we have moved into the 21st century.
                        > The true reformers from Nyanza are people like Miguna Miguna and Nyamogo
                        > Nyamodi. I would like them to get together, assemble data from the public
                        > domain on intolerance to opposition in Nyanza and seek funding from Western
                        > sources for championing the democratic liberation of Luo Nyanza from the
                        > despotic Odinga dynasty.
                        > Luo Nyanza must be truly democratic !!!
                        > Mohamed Warsama
                        --- On Sat, 8/25/12, Maurice Oduor <mauricejoduor@gmail.com> wrote:
                        From: Maurice Oduor <mauricejoduor@gmail.com>
                        Subject: [PK] Re: (VVM Forum) Goons Were Imported - Mama Cidi
                        To: VuguVuguMashinani@yahoogroups.com
                        Cc: "progressive-kenyans" <progressive-kenyans@googlegroups.com>, "young proffessionals" <youngprofessionals_ke@googlegroups.com>, "KOL" <kenyaonline@yahoogroups.com>
                        Date: Saturday, August 25, 2012, 1:46 PM


                        Going by your own words, please let's not say they were Luos. You
                        yourself have indicated that they were not arrested and identified.
                        Why then are you even bringing in the Luo factor? Were you there to
                        ascertain that they were Luos or are you just guessing? That type of
                        guess is dangerous because what you end up doing is poison the other
                        communities against Luos.
                        Tujiepushe na ukabila jameni.


                        On 8/25/12, Faiza Hassan <antihongo@gmail.com> wrote:

                        > Why were those goons not arrested and charged? One had a cutapult even
                        > infront of the Police.
                        > If they were arrested then we would know if they were all Luos or not!!!
                        > Government project? Me think so!!!
                        > Those goons were imported. Luos in Mombasa are not violent. That I know
                        > We are not Stupid jameni!
                        > Madam Naomi Cidi.
                        > Sent from my BlackBerry®

                        Produced by: Agriculture and Consumer Protection

                        Title: Strengthening farm-agribusiness linkages in Africa...

                        The Agribusiness Sector and its Support Institutions
                        Kenya has had a successful agricultural sector development since the early 50's. However it was not until mid 1960's, immediately after independence, that heavy interventions were injected in the agricultural sector. Policies covered every sphere of agriculture such as production, marketing, research, credit extension and price controls. Policies advocated the promotion of cooperatives and farmer based companies as well as promoting agro-industries for processing of agricultural products. In the 1970s an import substitution policy was instrumental in the development of agribusiness firms, especially those that could play an important role of import substitution. In the late 1970s and early 1980s, the government introduced an export diversification and expansion program to broaden the country's export base and enhance the drive towards industrialization. The Industrial and Commercial Development Corporation (ICDC) and the Development Finance Company of Kenya (DFCK) were major sources of loan capital and equity finance. By the 1990's the agro-processing sector employed about 10 percent of Kenya's workforce and contributed about 31 percent to GDP.
                        Farm-agribusiness linkages in dairy, cereals, traditional cash crops and horticulture have in the past been influenced by government policies towards agriculture. These policies include the general as well as the more sub-sector specific policies that have in the past been targeted towards the development of sub-sectors of special interest to the government, often through commodity specific marketing agencies.
                        In the dairy sub-sector, the policy effectively prohibited development of private sector based processing companies. This policy was implemented through the Kenya Dairy Board (KDB), whose major function still remains as that of regulating the industry by controlling private sector entry into dairy processing and marketing. Through these policies, the Kenya Cooperative Creameries (KCC) emerged as the main dairy processing and marketing body in Kenya and dairy cooperative societies as focal points for small-holder milk collection were established. A few of these cooperative societies later developed into dairy processing organizations. This policy changed in 1993 when private sector involvement in dairy processing was allowed, while the licensing role in the hands of the KDB was retained. The implementation of this policy also coincided with the collapse of the KCC, thereby providing a viable opportunity for private sector entry and development. By 2000, the number of registered private processing plants in Kenya was about 40, with a total employment of about 4 500.
                        The development of the small holder tea saw the deliberate support through the Kenya Tea Development Authority (KTDA). The authority was a parastatal apex body under which were a number of tea factories that were jointly owned by tea farmers and the KTDA. The liberalization policies between 1995-8 have resulted in the establishment of a Kenya Tea Development Agency (KTDAg), which is more farmer-inclined; and the total ownership of the 46 tea factory companies by tea farmers.
                        Rice is the second major cereal after maize, and has largely developed as an irrigation crop though little amounts are produced under rain-fed conditions. As a way of promoting rice growing under irrigation, a National Irrigation Board (NIB) was established as a parastatal, to develop irrigation schemes, and process paddy into rice; and market the commodity on behalf of farmers. The sub-sector as a whole was heavily protected by the policy of quantitative import controls to restrict imports. By 2000 the Mwea irrigation scheme had a total membership of 3 381 farmers producing about 31 900 tonnes of rice from about 6 052 acres. This is about 40 percent of the total domestic requirements and about 80 percent of domestic rice production in the country. Liberalization in the sub-sector in 1993 has witnessed several changes in both marketing and milling of rice with implications on production of rice in the Mwea irrigation scheme.
                        Horticultural development in Kenya has been characterized by less presence of government, despite the existence of the Horticultural Crops Development Authority (HCDA), and a department within the Ministry of Agriculture (MoA) in charge of horticulture. The HCDA is mainly a regulatory one, but also provides market information and extension services to the sub-sector. Private sector based institutions such as the Fresh Produce Exporters' Association of Kenya (FPEAK), the Export Promotion Council (EPC) have played a great role in ensuring that the sector grows. However, a cloud of uncertainty surrounds the sub-sector due to a decision by the government to regulate it, and also establish a central auction centre in Nairobi.
                        A major lobby group in the entire agricultural sector has been the Kenya National Farmers Union (KNFU), whose original mandate was the promotion of large-scale farmers' interests in the country. In the last two decades the role of the union in spearheading farmers' welfare has reduced greatly, due to lack of focus. Its role in a liberalized market environment has become murkier in the last ten years.
                        Case Studies
                        This chapter describes four existing farmer- agribusiness relationships that have shaped the development of the selected sub-sectors in agriculture in Kenya. The nature of the farm-agribusiness linkages range from a heavy presence of the government arm to an extreme lack of government interference. These relationships are discussed below.
                        Horticultural Exports- Homegrown Company Ltd.
                        The horticultural sub-sector in Kenya is perhaps the most rapidly expanding sub-sector in agriculture with export horticulture particularly excelling. The sub-sector was until 1966 a slow growing one, producing for the domestic market, except for only two companies that were involved in horticultural exports. The potential for the development of the sub-sector saw the establishment of the HCDA in 1967 to spearhead this nascent sub-sector. In 1968 fresh horticultural exports were only about 1 476 tonnes, but by 1999, the sub-sector exported 103 260 tonnes, reflecting an average annual growth rate of more than 15 percent. The total number of small-holder farmers engaged in export horticulture, and hence linked to agribusiness exporters are approximately 20 000.
                        Unlike other sub-sectors in agriculture, the horticultural sub-sector has developed in an environment of less government interference. The sub-sector is characterized by relatively easy entry conditions for agribusiness enterprises, easy access to production land, a good linkage mechanism for technological transfer and a forward marketing linkage that ties most of the sectors outputs to the European marketing system. Major stakeholders in this sub-sector are the Horticultural Department of the Ministry of Agriculture and Rural Development. This department is responsible for the overall policy direction as well as general oversight of the industry in terms of export quality control, horticultural extension, controls of export and imports of live plants. The Horticultural Crops Development Authority (HCDA) plays the more active role development of the sector including extension on behalf of government, provision of information and technology dissemination. The Kenya Agricultural Research Institute (KARI) undertakes horticultural research and technology development. Other stakeholders in the horticultural sector include the Fresh Produce Exporters' Association of Kenya (FPEAK), Kenya Export Development Support (KEDS) Program, and the Kenya External Trade Authority (KETA).
                        Homegrown Company Ltd is success story of production and export of packaged horticulture produce from Kenya. The company ventured into Kenya in 1982 and focused on the processing and export of vegetables to the UK market. The business strategy has been the production and packaging of produce at source so that it can be exported ready for the market outlet without further packaging abroad. In order to ensure the desired quality, and supply of fresh produce, it was important for Homegrown to enter into partnership with local farmers to complement its own production. Through this partnership the company is able to source about 25 percent of total requirements and in some cases such as French Beans, 100 percent of the total requirement from contracted farmers.
                        Linking arrangements
                        All farmers supplying to the Homegrown Company Ltd must have a supply contract. The contract is explicit in terms of the commodity to be supplied, the period of supply, the desired quality and quantity to be supplied. This implies that farmers on contract are able to work out their production schedules and put in place the necessary inputs to meet the contract quantities and quality. By implication also farmers agree to follow the recommended crop husbandry so as to maintain the required quality.
                        This contractual arrangement was initiated by the company as a strategy towards achieving optimal resource use in the export of fresh produce from Kenya. Through this strategy the company has its own nucleus of farm production units to meet a certain level of its requirements, and a network of farmers contracted to provide the balance.
                        Contracts entered with farmers for the supply of various types of fresh farm produce explicitly indicate the price as well as other quality dimensions that are important for delivery of the desired produce. These prices are however market driven and fluctuate from season to season
                        Benefits and constraints
                        By entering into a supply contract, farmers enjoy the benefits of an assured market for their farm produce; while at the same time benefiting from the fact that their farming activity risk is minimized by the certainty with which their production decisions are made. Farmers enjoy an assured price for the various grades of farm produce that they deliver to the contracting company.
                        Due to the relative involvement of the contractor in the production process farmers are supplied with the latest farming technology, such as the latest crop varieties and crop husbandry techniques. This has particularly been notable in the production of garden peas. The provision of technical extension by the contractor has played a key role in ensuring that farmers are able to optimize their production in terms of quality and quantity.
                        Homegrown Company Ltd also supplies fertilizers, and agro-chemicals on credit to those farmers who need material credit, so that they can be able to produce the expected quantities and qualities without exerting themselves. This is also in recognition of the fact that the credit market in Kenya is highly biased against agricultural production.
                        Farmers are in the long run able to appreciate the fact that farming on contract basis is a business. This orientation towards treating farming as a business is probably the greatest innovation that could change the structure of agricultural production in the future.
                        The company is in a business that requires strict adherence to delivery schedules, quality, minimum chemical tolerance limits, non-fluctuations in supply. Contracting puts the company in a situation where it is able to have a fairly good assurance of the above critical production variables and is therefore able to conduct forward planning of her activities with a high degree of certainty. The major market outlet for the company's product is in the European Union. This is a very sensitive market for agricultural products; hence an exporter must have total control of the agricultural production system so as to meet the stringent quality and minimum chemical residue requirements set for the market.
                        Since farmers are on contract to supply farm produce, any matters of conflict or misunderstanding are usually handled administratively. However should a farmer feel extremely disadvantaged using this process for redress then they have the option of using the district agricultural committee to lodge any complaints. In the very extreme of circumstances farmers are also free to result to legal redress, however this option is hardly utilized. Usually farmers will prefer to minimize chances of misunderstandings during the beginning of the season when new contracts are being signed.
                        Farmers feel disadvantaged in the business, as they are not quite sure about the relationship between the local price and the price of the export product. Some farmers feel that the market price offered by the company was low compared to the prices for the final product, hence the need for a better framework of price determination.
                        The major constraint faced by the Homegrown Company is ensuring that farmers follow recommended technical instructions so as to produce the required quality and quantity of the commodity. This is particularly important and critical as well in those commodities for which the company is wholly supplied by contracted farmers.
                        By contracting for supply of raw materials, the company benefits from not having to commit resources to actual production, but being able to ensure compliance to the necessary production requirements through an effective extension system.
                        Mwea Rice Irrigation Scheme
                        The traditional food crop production sub-sector has for a long time been dominated by parastatal enterprises with wide range of controls over the production and marketing of the commodities. Part of this existential reality could be explained by the desire by policy makers to ensure that food security concerns are taken care of, especially the desire to ensure that the urban population was well supplied with food at politically acceptable prices. The Mwea Irrigation Scheme (MIS) is the largest rice irrigation scheme in Kenya, producing about 80 percent of all rice produced in the country. This scheme was established in 1955 and was replicated from other British irrigation systems elsewhere. To date the irrigation scheme has 3 400 tenant farmers.
                        Linking arrangements
                        Irrigated rice production in Kenya has at the apex an agency, the National Irrigation Board (NIB), which is a parastatal organization responsible for coordination of irrigation schemes for rice and other crops in the country. This coordination includes undertaking feasibility studies in conjunction with the relevant departments in the relevant government ministries to establish the economic and social viability of any irrigation scheme in the country, and marketing of rice from the schemes.
                        The Mwea Irrigation Scheme was established in 1955 as part of the government policy on food self-sufficiency, while at the same time providing the rural population with an economic means of survival. The government, in collaboration with the British government established the MIS along typical irrigation models started by the British government in India. Later on the Japanese Government though JICA, became the main supporter of the scheme, providing irrigation infrastructure development, including construction and maintenance of the irrigation canals, tractors for land preparation, and canal maintenance. JICA also provided the initial rice technology as well as extension personnel. The management of the irrigation scheme was put under the NIB, established in 1966 as a parastatal under the ministry of Agriculture, to coordinate the development of irrigation schemes in the country.
                        For purposes of rice milling, the Mwea Rice Mill was established as a joint venture between the National Irrigation Board (55 percent) and the Mwea Farmers Multipurpose Cooperative Society Ltd. (45 percent). The latter is a cooperative established by farmers to deal with non-rice farming matters, particularly the granting of development loans to members. Rice farmers, as registered tenants on public land are expected to abide by the rules set by the NIB for rice production. Such rules include that fact that no other crop or animal production activity is allowed on the irrigation plots.
                        As a public organization mandated to develop and manage irrigation schemes, the NIB is the financing and development arm of government through which donor assistance is provided to the farming communities indirectly. In the case of the Mwea Irrigation Scheme, the NIB has a contractual agreement with farmers for the provision of a number of services and material credit for the smooth production of rice. This relationship is however on of tenant- landlord type since farmers have no rights to the land they farm. The production contract is renewed every year so as to incorporate changing economic conditions.
                        All contractual agreements are determined by the NIB. Farmers do not contribute to the determination of prices, though cases where this has on few occasions, benefited farmers have been reported, particularly on fertilizers where the NIB price was lower than the local market price. In the case of rice paddy the pricing was determined by the government as an in-factory price. At the consumer level the price of rice was also regulated and administered to eliminate chances of black marketing.
                        At the beginning of every crop season, farmers sign contracts with the NIB indicating the kind and level of services to be provided to them on credit. These services include, fertilizers, seed rice, tractor services for ploughing of their plots of land. At the beginning of the planting season water is provided, also on credit as well as the required extension services. However, the NIB does not extend direct financial credit to farmers. Instead a cooperative society, the Mwea Farmers Multipurpose Cooperative Society (MFMCS), established and managed by the farmers themselves has played a crucial role of availing credit to member farmers for other uses.
                        The nature of the relationship between farmers as tenants on one hand and the NIB on the other hand has been described as one of receiver and recipient, where the former have minimal role to play in the relationship. Mwea rice farmers under this arrangement have little say regarding the pricing structure adopted by the NIB for water use, material inputs, and the final farm gate prices for paddy rice.
                        Due to the long delay between delivery of crop and final payment of net proceeds, farmers have always retained a higher than the allowed amount of paddy for sale to the parallel markets so as to meet their immediate needs. The latter has evolved into an elaborate marketing network involving a chain of middlemen with trading linkages to major outlet stores in major towns.
                        The major constraint rice farmers face gravitates around the inability to play a more decisive role on issues pertaining to rice production and marketing. Farmers content that they should play a bigger role at the decision making level within the NIB, so that they can influence policies pertaining to pricing and marketing. Since farmers own 45 percent of the rice milling enterprise, through their cooperative society; this does not translate to a significant role within the NIB itself.
                        Despite the existence of a written contract between farmers and the NIB, the latter does not have the full legal mandate to institute any action on a farmer in the case of breach of contract. Any conflicts can only be resolved by arbitration by the ministry in charge of agriculture. Also, the pricing of services cannot be adjusted at short notice to reflect changing economic and international conditions, impairing the Board's ability to adjust to changing environment so as to compete effectively in the market place.
                        In 1993, price and marketing controls were removed and farmers are now faced with alternative market channels for rice. By 2001 it was estimated that there were 200 rice mills operating within the immediate environs of the MIS. Contractual obligations by farmers to the NIB were likely to be compromised, as farmers diverted rice paddy to private mills. Faced with this non-delivery NIB stood to lose all credit advanced to farmers unless there was a way of enforcing the contractual obligation.
                        Brookside Dairies -Milk Processor
                        The Brookside Dairies Ltd was established in 1993, just around the beginning of the post-liberalization era, with an initial processing capacity of 5000 liters of milk per day. The main plant is located close to Nairobi, surrounded by a number of dairy farms. By 2001 the firm has been able to increase its processing capacity to 200,000 liters per day to become the leading milk processing firm in Kenya, commanding about 40 percent of urban market for processed milk. The milk is supplied by over 15,000 farmers scattered in several areas of central and the rift valley.
                        Linking arrangements
                        Relationship with Farmers: Milk farmers are organized and registered as suppliers through a formal supply contract, which among other things indicates how much milk a farmer delivers to the company each day. This is important to the processing company as a planning tool as well as a major factor in determining capacity utilization this also helps plan the most optimal utilization of transport fleet. Farmers are normally grouped into collection centres, which play a dual purpose of raw milk collection as well as a service facility where farmers collect their materials from. At the delivery centre raw milk is entered into a farmers account after it has been tested for quality. The firm then collects the raw milk from these centres for transportation to the processing plant.
                        Since the dairy industry has been liberalized, the forces of supply and demand in the market place essentially determine raw milk prices. However the real determinants of the price are in this case the milk processing companies. Their price determination behavior is normally dictated by the supply conditions as well as the degree of competition for raw milk in the market place since the demand for processed milk is only slightly price elastic. Prices offered to farmers are reviewed at various times and are communicated to the producers.
                        The following services are offered to farmers on credit and recovered through milk deliveries:
                        • Extension services including regular farmers field days for educational as well as exposure to any new developments in the dairy industry.

                        • AI: This is an important input services that farmers need and whose quality should be assured, so that farmers can be able to increase their milk output. The liberalization of AI services in 1992 has resulted in the increased use of low quality breeding bulls in addition to a large number of AI service providers, offering services whose quality cannot be guaranteed.

                        • Animal Health Drugs. The provision of quality drugs for animal health drugs is an important role, which is instrumental in milk production. The marketing of these drugs is liberalized, opening farmers to several outlets as well as varieties of drugs whose potency could be suspect.

                        • Animal Feeds. These are sourced from reliable companies at wholesale prices and resold to dairy farmers through the collection centres.
                        The major constraint faced by the company is one of ensuring the farmers will comply to the contractual agreement especially delivery of milk during the dry season, and what should be done to farmers in cases of failure to comply. The company has opted for dialogue as its option for resolving problems. However this uncertainty can be critical to operations, when demand for raw mild outstrips supply.
                        Smallholder Tea - The Kapkatet tea processing factory
                        Kapkatet Tea Factory is one of the 46 factory companies operating under the Kenya Tea Development Agency (KTDA) umbrella and is one of the relatively new factories, established in 1992, as part of KTDAs strategy of coping with increased production of green leaf. The factory is wholly owned by small-holder tea farmers. However, the management of all factories is undertaken by the KTDA and aims at harmonizing factory operations, while allowing farmers to spend their energies on tea farming. The factory started with an initial farmer population of 3 000 planting tea on about 1 100 acres. By 2001 the number of farmers had grown to 5 266 and area under tea had increased to 4 000 acres.
                        Linking arrangements
                        Relationship between factory and farmers: A tea farmer is expected to have one share in the processing factory as well as in KTDA. This allows the farmer to deliver tea, participate in elections and to benefit from any services the factory may offer.
                        Tea is an internationally traded commodity whose prices are determined by world market conditions, but the channel of money flow from auction time to final payments to farmers takes about three months. The mode of payments to farmers therefore includes a monthly average per unit price fixed for the entire year; a half-yearly bonus and a final bonus at the end of the year. The average price ensures that farmers have a monthly payment to meet their regular needs, while the bonus payments are expected to reflect the world price trends net of processing, marketing and other overhead costs.
                        Benefits and constraints
                        By participating in a vertical ownership of both, the factory company that processes green tea, and the KTDA, farmers benefit mainly from profit sharing in tea processing while being able to concentrate on farming activities. Other benefits include the availability of fertilizer on credit. The fertilizer is sourced internationally by the KTDA and sold on credit to the tea farmers through the factory company, on the understanding that it will be used in tea production only. Tea deliveries to the factory also act as security for loans. Farmers are entitled to 2 kg of made tea every month at a reduced price for domestic consumption. Extension services are offered as well as quality control of harvested tea leaves. Tea transportation from the collection centres to the factory for processing is normally offered.
                        The factory on the other hand has an assured supply of the raw material from member farmers and is able to plan its processing schedules at minimal risk of farmers diverting their produce to other factories. Cases of farmers diverting green tea to other processors occur but are not significant, because the alternative prices offered by these markets are way below what the factory offers.
                        The dual role as farmers and owners of the factory-company means that farmers are duty bound to support the factory to ensure success. The factory has an elaborate system of farmer representation at all levels. At the tea collection centres, matters pertaining to tea picking and extension are discussed and resolved. At the factory level, farmers constitute the factory management board where all issues pertaining to tea and farmers are discussed. Any conflicts between farmers and factory management, which cannot be resolved at the factory level, are usually referred to the KTDA.
                        Tea farmers operate in a business environment where they are not in the know as regards tea prices. They therefore are not in a position to ascertain whether or not the apex body in charge of marketing of tea is unfairly treating them. Farmers feel constrained by the method of a fixed average monthly payment for their tea, and would prefer a situation where payments are more frequent, and also bear direct relationship with auction prices.
                        The ability of farmers to maintain high quality standards is a major constraint that the factory faces. The factory still faces the challenge of educating farmers on the long procedures associated with international commodity marketing, hence the need for average payments. Fertilizer pilferage still occurs amongst farmers, thereby affecting tea quality and output. The factory remains powerless in the face of these malpractices.
                        Factors Contributing to Success
                        Linkages in farm- agribusiness are a common feature of agricultural production, marketing and processing. This linkage could be vertically linked as in the case of tea and irrigated rice or a loose pure supply contract as in the case of export vegetables or dairy processing. The farm-agribusiness is a chain linkage relationship between producers on one hand and processors on the other hand for mutual business success. Experiences from a number of such linkages in Kenya however indicate different degrees of success among these participants. Some of the critical factors responsible for farm-agribusiness success are described below.
                        The Role of the Initiator
                        In any successful agribusiness, the role played by the initiator of the linkage is important. In the above case studies, all the linkages were initiated by either the agribusiness company itself or the government agency responsible for development of a given commodity. The initiator was usually the organization with the greatest single stake in the economic activity. Where profits to the single initiating entity was essential, then the initiator played a greater role in developing a farm-agribusiness relationship that would be profitable while at the same time providing farmers with the necessary incentives to produce. Where the initiator is a private agribusiness enterprise the development of the linkage is usually faster and more farmer-inclined in terms of service delivery to them in order to tie them to given production, delivery and quality schedules.
                        The Role of the Government
                        A successful agribusiness should operate within a favourable and conducive environment where policies are clearly indicated, and the respective roles of the major actors are well delineated. In the above four cases linkages in the horticultural sector have a longer life span of progressive growth, owing to the fact that the role of government in this sub-sector has been more regulatory and indirect, using lobby organizations. Where government involvement was heavy through direct participation as the sponsor of the agribusiness linkage, such as in irrigated rice production, growth has tended to be slow and less dynamic. This is probably due to the very nature of government inclination towards efficiency in production and distribution, as well as the amalgamation of different objectives in a given enterprise. These objectives could be social equity, food self-sufficiency and the generation of income for a given constituency of the population. In the face of liberalization and the changing world economic order, farm-agribusiness linkages with heavy government control are unlikely to fare well. This means that governments have to be sensitive to changing economic climates and reduce their presence to policy and regulatory work.
                        The Role of Farmers and Farmers' Organizations
                        Farmer organizations in the four agribusiness cases above have taken the shape of cooperatives, except in tea where farmers are both owners of the agribusiness companies and have a parallel cooperative to serve other functions not handled by the company. This development is a common feature in the Kenyan business enterprises where workers will establish a SACCO to handle their need for credit, which is normally not catered for in the traditional credit market. These farmers' cooperative societies have however played an instrumental role in articulating the need to take farmers interests and development aspirations into account. For example the farmer cooperative in the Mwea irrigation scheme has been at the forefront in ensuring, that farmers' activities and operational climate change to incorporate global, regional and national policy changes. The same scenario applies to farmers in the tea sub-sector where farmers have systematically argued for total ownership of the tea factories, in tandem with national policies for the management of farmer-based agribusiness enterprises.
                        The Nature of the Product
                        The nature of the product is an important variable in the determination of the farm-agribusiness linkage. Where the product is highly perishable, and therefore requires careful handling, then the farmer and agro-processing firm must work very closely to synchronize production, transportation and processing so as to minimize losses at the different stages, including the production stage. This means that both all actors in the system will collaborate, and evolve mutually beneficial arrangements for the overall success of the business. This is clear from the involvement of the agribusiness firm in production matters such as the provision of material credit, extension services, and the establishment of produce collection centres. Where a product is not highly perishable sensitivity towards important aspects of the product supply and marketing may not given the necessary importance. This is the case in rice production and marketing, where farmers can afford to keep the harvested paddy rice in their stores for some time, should they feel that the contractor is unfairly treating them. The other three commodities are quite sensitive to delays either at the farm, or during transportation, hence the linkage in these commodities must be always aware of the precarious nature of the product.
                        The Nature of the Market
                        The nature of the market influences the farmer- agribusiness linkages to the extent to which the market exerts its influence on product quality. For example the market for fresh vegetables in the European countries is quite sensitive to various quality dimensions. This means that any successful farmer-agribusiness linkage must be equally conscious of quality as well as other requirements dictated by the market. Production for this market type must therefore be a collaborative effort between the two parties. On the other hand where the market is not very sensitive to quality issues such as in rice, farmers are less inclined towards production based on quality, since crop variety, as well as the milling process determines the latter.
                        The spatial location of the market imposes unique considerations between the farmer, as the source of raw material and the agribusiness firm, as the main processor. These considerations include the ability of farmers to keep to tight production and delivery schedules, quality, and quantities. This implies evolving a farmer relationship mechanism where they see themselves as a constituent part of the agribusiness production chain, playing a critical role. This is the case in the production of tea and fresh vegetables for the export market.
                        The Competition
                        Where competition in the market is stiff, the nature of the farmer-agribusiness linkage will usually evolve to internalize possible market threats from competitors. Competition is usually at both the supply of the raw material and in the sale of the final product. When farmers have a large latitude with regard to who they could sell their raw product to, then the linkage has to be strong and mutually beneficial; and must involve farmers in developing the linkage terms, as specified in the supply contracts, so as to avoid non-compliance. Similarly, where the final product market is very competitive, the agribusiness enterprise has to evolve modalities and strategies for growth and maintenance of its market share. Such a strategy must take due care of the raw material supply source. This is the case with the sale of processed milk, whose competition also implies competition for raw milk from farmers.
                        The Role of Lobby Groups
                        Agricultural sector lobby groups are to be found in some of the sub-sectors where agribusiness presence is central to the success of the sector, and where common interests among the agribusiness firms is such that they need an independent organization to act on their behalf on matters of policy. From the four case studies, sub-sectors where lobby groups exist have shown faster growth and overall stability.
                        Conclusions and Recommendations
                        Farmer- agribusiness linkages have an important role to play both in the development of small-holder commercial agriculture and in the development of domestic capacity for increased value added for agricultural produce through processing. The linkage of production with processing helps stabilize commodity markets, by minimizing risks associated with prices and market outlets, since farmers are able to have a priori information about producer prices, while agribusiness firms are also able to determine their production schedules based on sure supplies at definite prices. This implies that they can be able to enter into forward delivery contracts with greater certainty.
                        Farmer-agribusiness linkages have also evolved as alternative sources of agricultural credit to small-holder agricultural producers. The fact that the existing credit markets are biased towards agriculture in general and small-holders in particular, due to their stringent requirements and high interests, offers more reason for the promotion of these linkage mechanisms as alternative ways of assessing credit. The availability of material credit by the agribusiness firm is one of the most attractive incentives farmers consider before entering into any form of linkage.
                        Farmers operate in a dynamic environment where new technologies are continuously being developed and therefore have to be made available to them at least cost. Farmer-agribusiness linkages have an in-built extension component as part of the relationship. This is an important feature serving both parties positively as it ensures that farmers are producing quality and types required by the market. In the case of internationally traded commodities, this ensures that farmers' production systems comply with international specifications. In situations where the technologies for production are patented, this ensures that there is no illegal transfer of material to non- contracted members.
                        Vertical integration is an important strategy for agricultural development and expansion of industrial processing capacity. This however works best where the initiator of the linkage is willing to evolve this type of relationship. In situations where the government was the initiator, playing the role of processor, vertical integration involving farmers' part or total ownership in the processing and marketing of final product. The vertical integration must be well crafted to ensure that farmers' limitations in business management do not influence the operations of the firm. This arrangement requires independence within an interdependent system of production.
                        Within most farmer- agribusiness linkages, a farmer cooperative society, will usually be found. While their original justification has its roots in the social aspects of farmers as individuals, their role is often important in helping farmers. However their ability to develop further is often limited by the policy and rules governing their operations. There is potential to play increasing, but changes will be required concerning their operational modalities as well as their decision making systems. Farmer based associations and lobby groups interested in furthering farm-agribusiness linkages should be strengthened and encouraged to develop a framework of collaboration and coordination of their activities so that they are focused and inclusive. These groups have in some sub-sectors such as horticulture, been instrumental in ensuring that better policy environment is maintained. They also need to be encouraged to be focused and to avoid involvement in non-farm-agribusiness linkage matters.

                        USAID KENYA DAIRY SECTOR

                        COMPETITIVENESS PROGRAM

                        QUARTERLY PROGRESS REPORT

                        OCTOBER 2009 - DECEMBER 2009


                        Contractor Information:

                        Mulinge Mukumbu/Daniel Diang'a

                        Land O'Lakes, Inc.

                        P.O. Box 45006, 00100,

                        Nairobi, Kenya

                        Phone: 254-20-3748526 or 3748685

                        Fax: 254-20-3745056

                        Executive Summary

                        The report summarizes the key activities implemented and the associated accomplishments for the

                        Kenya Dairy Sector Competitiveness Program (KDSCP) in the first quarter of the 2009/10 Fiscal Year.

                        The KDSCP activities contribute to the achievement of intermediate results under USAID/Kenya

                        Mission's SO7 on "Increasing Rural Households Income."

                        Key Highlights

                        The key highlights for the reporting period include:

                         Reached an additional 23,803 rural households in the quarter. These are households reached

                        through program-facilitated capacity building events including field days, exposure tours, farm

                        demonstrations, service provider trainings, among other program-facilitated activities.

                         Facilitated capacity building of more than 12,200 dairy farmers in the quarter. Program

                        interventions focused on training dairy farmers in operational zones to equip them with

                        necessary technical skills to increase herd productivity and incomes. The training forums,

                        organized in collaboration with key stakeholders such as private service providers, Ministry of

                        Livestock extension personnel, Kenya Dairy Board, covered diverse topics such as feed/fodder

                        production, appropriate feeding regimes, feed conservation and formulation, modern breeding

                        techniques and milk handling hygiene.

                         Realized an exponential growth in milk volumes traded by smallholders' farmers. Groups

                        working with the program recorded an impressive increase in volume of trade with 68,480

                        metric tons moved in the period from 23,292.8 metric tons in the previous quarter. This was

                        mainly due to participating farmers adopting productivity-enhancing technologies that the

                        KDSCP is promoting with the onset of the rainy season.

                         Uptake of Artificial Insemination in breeding in areas where most farmers were using bulls for

                        breeding has been observed. Overall, the proportion of farmers using artificial insemination has

                        gone up and now stands at 56% of farmers participating in program compared to 40% at the

                        start of the program. In Kericho, the proportion now using AI is 50%. Officials of farmer groups

                        and service providers in Trans Nzoia Milk shed cite increased business as a result of the KDSCP

                        program. The Agricultural Development Corporation (ADC), the distributor of semen in Trans

                        Nzoia Milk Shed recorded a 21% increase in volume of semen moved between March and

                        October, 2009.

                         Sixty-nine out of the 70 Smallholder Business Organizations (SBOs) participating in the program

                        are operating profitably. Member farmers now receive fairer prices for their produce (milk). A

                        number of these organizations have also embraced gender balance in their management, with

                        women and youth elected as group officials.

                         Program milk quality interventions have started bearing fruit at the farm level. Programfacilitated

                        farmers and farmer groups milk procurement staff trained on milk handling and

                        hygiene have reportedly begun to bear positive results. Suka Cooperative Society has reported

                        zero volumes rejected based on quality after receiving these trainings in sharp contrast to

                        previous periods before receiving the training.


                         Facilitated the successful revival of the Kenya Dairy Processors Association in the reporting

                        period. This is a major step forward and will ensure that processors speak with one voice on

                        policy and regulatory issues going forward. The association collapsed some time back mainly due

                        to a lack of direction and wrangles among the processors in the country.

                         Facilitated training of 47 breed inspectors to meet the demand for dairy animal registration.

                        Before this, the breed societies did not have enough breed inspectors to handle the nationwide

                        interest in animal registration. For participating farmers, this initiative is expected to realize

                        immediate and considerable gains in terms of added wealth from increased value of registered

                        animals. Since registered animals are expected to use Artificial Insemination when breeding, it is

                        anticipated that the superior and higher-producing progenies/offsprings will help the program

                        realize its target of increasing yield per cow per day to 15 liters.

                         A Good Manufacturing Practices manual for the dairy industry was approved as an official Kenya

                        Bureau of Standards industry standard in the reporting period. This standard forms the basis for

                        Good Manufacturing Practice training for milk collection centers, milk bars/shops and milk

                        processing plants staff and personnel that will begin in the second quarter of 2010. The program

                        will now commence training of 1250 actors along the value chain and include "compliance to the

                        standard" as a requirement for licensing. The text of the proposed Dairy Regulations was

                        finalized, having been approved by a public committee representing the concerned government

                        ministries and associated dairy industry organisations. The Dairy Regulation has been submitted

                        to the Kenya Dairy Board for legislation as a sub-regulation under the Kenya Dairy Act. Kenya

                        Dairy Board will submit the text to the Ministry of Livestock Development. When legislated, the

                        dairy regulation will form the basis for quality assurance throughout the dairy industry. A related

                        achievement in the quarter included completing the final text of a reader friendly Code of

                        Hygiene for the industry.

                         The program contracted a consultant – Vedaman Consultants – to work with the technical

                        working group appointed by the Permanent Secretary, Ministry of Livestock Development to

                        develop the Dairy Master Plan in the quarter. The consultant is currently in the field collecting

                        stakeholder views. Once finalized, the Master Plan will provide the technical direction for the

                        industry in an effort to enhance competitiveness.

                         In this quarter, the program supported the Dairy Task Force's National Dairy Stakeholders'

                        Forum. The theme of the forum was "promoting synergy in the dairy sector". The forum was

                        organized with an aim of enhancing competitiveness in the dairy industry through stakeholder

                        interaction, networking and development of sustainable alliances across the value chain. The

                        minister and his permanent secretary attended the forum and effectively fielded questions from

                        the stakeholders.

                         Implemented action plans developed by stakeholders to build capacity to improve operations of

                        the Smallholder Business Organizations (SBO) and farm-level productivity. Seventy farmer

                        groups working with the program have participated in capacity building activities. We have now

                        exceeded program target of fifty groups by end of Year 2.

                         Provided technical assistance in producer group formation and registration, as well as training in

                        group leadership and governance to seven (7) new farmer groups in the reporting period. The

                        program also provided market information and technical assistance that aided the development

                        of market linkages with traders, processors and other bulk purchasers of milk to ensure that the

                        milk produced reaches the market for these new groups. These efforts have now enabled over


                        3500 dairy farmers to access better markets at better prices than when they were selling milk


                         Aided the development of strong and business-oriented smallholder dairy cooperatives in the

                        quarter. In the reporting period, Suka Cooperative in Nakuru milk shed was linked to a feeds

                        manufacturer. The 514 farmers affiliated to the cooperative are now able to access animal feeds

                        on credit and pay by end of month from milk proceeds

                         The program carried out training for 22 farmer cooperatives in the quarter through business

                        performance review workshops, training in business and financial management, commercial/cooperative

                        law, dairy record systems, milk-cooling operations, artificial insemination project

                        management, and merchandise management. All famer groups working with the program have

                        now had their committee officials trained. This is expected to improve management at the

                        farmer group level, resulting in greater benefits to member farmers.

                         In the reporting period, 10 cooperatives in Kinangop milk shed had their strategic plans finalized,

                        while 8 groups finalized business planning in Kericho milk shed. This now brings the total

                        number of groups with strategic plans to 14. The remaining 56 groups are projected to finalize

                        their plans by end of the year.

                         Engaged with the cumulative 295 service providers who now provide additional services against

                        a target of 150 by end of year two of program implementation. In the reporting period, 96

                        service providers (of the cumulative total of 295) were trained and linked to dairy cooperatives

                        in Kinangop and Nyeri milk sheds. A further 6 were recruited and linked to farmer groups in

                        Trans Nzoia milk shed.

                         The program leveraged an estimated $978,000 in nonproject resources through collaborations

                        with other sector players via the DTF in the reporting period. This was achieved through

                        stakeholder contributions to sector initiatives – both in kind and monetary. A significant

                        proportion was realized from farmers' participation in program-organized events.


                        1.0 Introduction

                        Land O'Lakes is implementing the Kenya Dairy Sector Competitiveness Program (KDSC) with the

                        financial and technical support of the United States Agency for International Development (USAID). The

                        KDSC is a five-year program that aims to improve Kenya's dairy industry competitiveness. Under this

                        program, Land O'Lakes, Inc. employs a market-driven value chain approach, utilizing a Business

                        Development Services (BDS) methodology. The KDSC will help transform the Kenyan dairy industry

                        into a globally competitive, regional market leader, with the overall goal of increasing smallholder

                        household income from the sale of quality milk. Land O'Lakes is facilitating this transformation, while the

                        industry stakeholders are leading it.

                        The Program objectives are three-fold:

                         Increase competitiveness of the Kenyan dairy sector through collaboration among sector

                        stakeholders and increased capacity of public sector agencies to serve the needs of the sector;

                         Increase marketing of milk meeting quality standards by producer-owned milk bulking/cooling

                        businesses; and

                         Enhance access to market-linked business development services and technologies by male and

                        female dairy farmers and processors producing dairy-related inputs.

                        In its implementation, the program pays particular attention to environmental and gender concerns and

                        effects corrective action as appropriate. The KDSCP takes into account the varying roles, assets,

                        knowledge and skills that men, women and youth bring to dairy farming. The program therefore

                        facilitates the implementation of opportunities for integrating youth and family members into dairy valuechain

                        economic activities.

                        Towards Strategic Objective 7

                        The KDSCP contributes to the USAID Strategic Objective 7.0 on "Increased Rural Household Incomes."

                        The Program is implemented through a range of activities grouped into three broad components. The

                        components and the associated deliverables are:

                        Component 1: Enhanced Capacity for Milk and Production Input Quality Certification and Market


                        Deliverables comprise:

                         Increased smallholder household income

                         Increased use of technology

                         Improve and enact industry policies and acts that enhance competitiveness

                         Develop and implement/enforce quality certification frameworks and work towards a graded

                        payment system

                         Dairy enterprises achieve national/international certifications and enforcing quality regulations

                        on suppliers

                         Increase feed marketed under new quality standards


                        Component 2: Dairy Smallholder Business Organization (SBO) Development

                        The key deliverables are:

                         Producer organizations strengthened.

                         Increased number of MBCs with HACCP and /or SBOs with national certifications.

                         Increased raw milk sales by SBOs under agreements that pay premium for quality.

                         Increased gross revenue of milk bulking/cooling businesses from sale of inputs and services

                        other than milk

                         Increased number of SBOs transformed into sustainable businesses entities

                         Increased number of cooling units installed/rehabilitated by SBOs

                        Component 3: Availability of dairy Business Development Services

                        Key outcomes/ impacts will include:

                         Enhanced range of business services to producers

                         Increased value of services/inputs provided by business service providers

                         Increased number of smallholders purchasing private sector services at full commercial rates

                         New technologies or management practices made available for transfer

                         Increased number of dairy farmers receiving loans from financial service providers

                         Increased number of smallholders engaged in new, diversified dairy-related enterprises

                         Increased number of dairy farmers receiving short-term training

                        Implementation Strategy and Key Activities

                        The KDSC Program is implemented using innovative, international best practice approaches and

                        methodologies that ensure achievement of expected results and sustainability of impacts long after the

                        end of the program. Using this methodology, Land O'Lakes, Inc., the implementing agency, using local

                        service providers and facilitators, supports market-based services/solutions, and action-oriented policy

                        research to overcome both industry-level and enterprise-level constraints to competitiveness at key

                        points along the dairy value chain. Industry stakeholders have since been engaged to been engaged to

                        identify competitiveness constraints, and propose solutions to these constraints.


                        2.0 Program Implementation

                        This section expounds the key activities undertaken during the period under review, and the associated

                        accomplishments/progress realized. As previously mentioned, the interventions under KDSCP are

                        grouped into three broad areas/components, namely activities for enhancing quality of inputs and

                        products, including policy and standards review and advocacy activities. Dairy smallholder business

                        organization development and farm-level productivity activities; and activities that aim to increase dairy

                        business development services. Achievements in the reporting are summarized below:

                        2.1 Component One: Enhance Capacity for Milk and Production Input Quality

                        Certification and Market Promotion

                        Program interventions in this component continued to focus on strengthening dairy sector institutions

                        and associations to equip them with the necessary skills and technical capacity to enhance industry

                        competitiveness. The program also put considerable effort in organizing and facilitating stakeholders

                        meetings in the reporting period to galvanize collective stand/action on issues affecting the industry. This

                        is informed by the fact that building institutional competence is key to facilitating development and

                        fostering longer-term sustainability through the empowerment of local actors.

                        Activities in the quarter also focused on reviewing industry standards to improve dairy products quality

                        and expand markets. A sample of the activities and outputs realized in the quarter include:

                         Continued facilitating capacity building of three dairy associations – Kenya Livestock Breeders

                        Organizations (KLBO), Dairy Processors Association, and Kenya Livestock Producers

                        Association (KLPA)

                         Continued reviewing/developing industry standards to enhance product quality

                         Continued facilitating meetings of the National Dairy Task Force and the Regional Working


                         Developed the terms of reference and selected a consultant to carry out a consumer preference

                        survey for dairy products as a first step towards dairy products market promotion/

                        consumption campaigns

                         Hired a consultant to develop an industry integrated management information system in the


                        2.1.1 Continued facilitating capacity building of three dairy associations

                        Previous progress reports have highlighted capacity building activities for a number of industry

                        associations. These efforts have started bearing fruit, with some of these organizations – notably the

                        Kenya Dairy Processors Association (KDPA) – which were hitherto not operational relaunching. This is

                        expected to give the industry a much-needed boost especially in marketing and dairy products quality

                        issues. The program also facilitated training of 47 breed inspectors in the quarter, a move that will

                        considerably increase the number of animals registered in the Kenya Stud Book in the country, and

                        subsequently increase the value of animals and total wealth of participating farmers. Specific activities and

                        achievements in the reporting period are expounded below.

                        Facilitated capacity-building interventions for Kenya Dairy Processors Association (KDPA)

                        We are pleased to report the successful revival of the Kenya Dairy Processors Association in the

                        reporting period. This is a major step forward and will ensure that processors speak with one voice

                        especially on policy issues going forward. The association collapsed a while back mainly due to a lack of

                        direction and wrangles between the processors in the country.


                        Kenya dairy industry is the second-most-developed in Africa; however, the sector is highly unstructured

                        and is characterized with a lot of inefficiency along the value chain. Trade of dairy products in the region

                        and beyond is significantly compromised by the fact that local products are uncompetitive besides other

                        cross-border challenges. A processors association is very critical in among other things growing the

                        market for the dairy industry locally, regionally and internationally, lobbying for improved environment

                        that foster development in the sector.

                        To revive the Kenya Dairy Processors Association consultative meetings were held to collect the view

                        from the stakeholders - mainly the processors - on the process of reviving the association (KDPA). The

                        meetings were structured taking in to account varied engagements in the industry that various

                        processors and stakeholders have. In that regard three meetings were held as follows.

                         Large processors consultative meeting

                         Medium, small and cottage/mini processors consultative meeting

                         A joint processors and stakeholders consultative meeting

                        The consultative meetings were designed to gauge the processors' keenness and willingness to revive

                        and sustain an association and establish the overall agenda for the KDPA. Additionally, the meetings

                        were meant to review the legal instruments and strategic plan and eventually establish a governing body

                        and agree on an operations framework.

                        The three consultative meetings were held and a review of the memorandum and articles undertaken by

                        a legal consultant hired by the program. A caretaker committee was then formed to spearhead the

                        association's revival process. The caretaker committee proceeded to develop a 5-year strategic plan

                        which was reviewed and adopted by the committee. A launch of the association took place on October

                        15, 2009, at Sarova Hotel in Nairobi, and a new caretaker committee was established to prevail over the

                        existing board to readmit members before a formal election was undertaken. ESADA was mandated to

                        coordinate the activities of the association in the interim before a fully operational KDPA secretariat is

                        set up. ESADA will among other tasks keep register of members and call for application for membership

                        from stakeholders.

                        The association will help the program to realize a number of key targets, especially on dairy products

                        market promotion. Already, the program is working closely with the KDPA in the assessment consumer

                        preference, planning dairy consumption campaigns and in the development and adoption of quality

                        payment systems. This partnership is expected to go along way in enhancing industry competitiveness in

                        the long run.

                        A section of participants at the

                        KDPA launch in Nairobi


                        Facilitated capacity building interventions for Kenya Livestock Breeders Organization (KLBO)

                        Two major activities were successfully carried out in the reporting period:

                        1. Supported the KLBO to develop a marketing plan aimed at creating awareness about the

                        organization and encouraging farmers to register their animals with the Kenya Stud Book (KSB).

                        2. Facilitated the training of 47 breed inspectors to meet the demand for dairy animal registration.

                        Before this, the breed societies did not have enough breed inspectors to handle the nationwide

                        interest in animal registration.

                        Dairy breed inspectors training

                        Following a very successful session on the benefits of registering animals for farmers at the Livestock

                        Breeders Show and Sale in June 10th–12th, 2009, there was renewed demand for animal registration and

                        performance recording. One of the main bottlenecks to registration and recording has been that there

                        is a scarcity of competent persons to inspect the dairy animals for admission to the stud book register at

                        the Kenya Livestock Breeders Organisation (KLBO). The KLBO then requested the KDSC program to

                        facilitate a breed inspectors training to aid the exercise.

                        The aim of this initiative was to create a pool of inspectors accredited to KLBO who will be available to

                        inspect dairy cattle upon request. Kenya has an estimated 3.5 million dairy cattle. 60% are Holstein-

                        Friesians and their crosses, 30% are Ayrshires and their crosses while 10% comprise of Jerseys and

                        Guernseys together with their crosses. Of the 3.5 million dairy cattle, only about 2% are registered,

                        whereas less than 0.5% of milk produced is recorded. The five-day training was carried out from

                        November 30, 2009 to December 4, 2009 at Chester Hotel in Nakuru. The training entailed both

                        theory and practicals. In compliance with the program implementation methodology, an advertisement

                        was placed in the local dailies announcing the training and inviting interested parties to apply.

                        Applications were received and a short list prepared. Letters were sent out inviting successful applicant

                        to the training. The trainees were requested to pay a registration fee of KES 5000. In total, 47

                        participants drawn from all the dairy producing area in Kenya were selected. These included a number

                        of KLBO staff some of whom were newly recruited.

                        This initiative is expected to realize participating farmers immediate considerable gains in terms of

                        increased wealth from increased value of registered animals. Industry experts estimate value of

                        registered animals to more than double in the short term, because all registered animals are awarded

                        registration certificates.

                        In the long run, the following benefits are expected to accrue to the farmers:

                         Increased production for progenies: Registered animals are expected to use Artificial

                        Insemination when breeding. This will result in superior and higher producing offspring.

                         Registered animal scan also participate in agricultural and breeders shows. The shows

                        expose farmers to markets – for dairy animals and even milk markets. Such farmers also act

                        as service providers, and earn extra income as model farmers.


                         The country currently supplies the region with dairy animals. Such buyers of dairy animals

                        only buy registered animals, whose lineage is well-documented. Farmers registering animals

                        will therefore be able to tap into such markets in the near future.

                         At the national level, the industry will be able to know the number of dairy animals we have

                        in the country and thus be able to plan – e.g. , be able to plan for semen importation, and

                         It is expected to result in a higher number of cattle being registered and recorded. This in

                        turn translates to better selection of bull dams, hence better bulls used for semen

                        production, giving rise to improvement of the dairy industry in the long run.

                        Progress and benefits from this initiative will be reported in future reports.

                        Facilitated capacity building interventions for Kenya Livestock Producers Association (KLPA)

                        Initial assessment of the KLPA indicated that the association faced a number of constraints. Key among

                        them was lack of clear understanding of who its main membership consisted of and lack of an advocacy

                        agenda. The association has a Chief Executive Officer who has been seconded to it from the

                        government and has offices in Nakuru.

                        The first activity in building its capacity was therefore to engage with its board to facilitate the process

                        of self identification and creation of purpose in line with the demand of the external environment in

                        which it exists. A training of the board was held in Nakuru. The main issues that came out of the training

                        Participants in a theory session

                        A facilitator takes participants through a

                        cattle judging/practical session


                        was that the board had not spent any time developing relationships among its members and there was

                        considerable rivalry that had led to its failure to function properly. The CEO felt that he lacked direction

                        from the board.

                        The key resolutions that came out of the training were;

                        1. Membership- The board felt that they need to have more discussions with various livestock

                        associations in order to build a membership base out of this group. The issue was to be

                        discussed in their next board meeting.

                        2. Strategy and approaches- The board felt that they needed to re-look at their strategy and the

                        approaches that they will be using in their service provision to their members, and they agreed

                        to hold a special board meeting to discuss those issues.

                        3. Main thrust of their work- The board agreed that their role was lobbying and advocacy for

                        issues in the livestock sector and that they needed to come up with an action plan on this. They

                        also resolved to bring the issue for discussions in their next meeting.

                        The board has since never met. The rivalry within the board is such that there is little hope that the

                        organization will actually become the apex lobbying and advocacy association for the livestock sector it

                        hopes to become unless the board was reconstituted and new membership developed. The KDSCP

                        offered to facilitate a meeting of livestock associations to act as a recruitment opportunity for the KLPA

                        and also to train them on lobbying and advocacy. Unfortunately, the leadership did not have sufficient

                        ownership of the process and expected emoluments for attending the meeting.

                        The program has since resolved to change its approach of working with the KLPA going forward. We

                        plan to stimulate action from the industry players via two key channels:

                        1. KLPA was formed by members of KLBO, mainly the breed societies. The program hopes to

                        facilitate a meeting between the KLBO board and the KLPA board with an aim of KLBO

                        demanding lobbying and advocacy services from KLPA and hopefully being able to enforce

                        change of leadership at KLPA.

                        KLPA board members in an

                        experiential training exercise

                        during the Board training in



                        2. The conclusion from the capacity building efforts made on KLPA is that one of the key

                        impediments to the development of a competitive environment in farming in Kenya is the lack of

                        professionalism and institutional infrastructure to enforce ethical standards of behavior. The key

                        recommendation on this is the development of a coordinating mechanism for the dairy cluster

                        as recommended by the CEO meeting. The cluster would then be able to set enforceable

                        standards of excellence in all aspects of the dairy value chain. This would them be the forum

                        where associations representing farmers would be forced by peer pressure to think

                        competitiveness and to provide services to their membership. This is the approach the program

                        will be adopting going forward.

                        Progress will be reported in future reports.

                        2.1.2 Continued reviewing/updating/developing industry standards and documents

                        As mentioned in previous progress reports, improving milk quality by establishing quality certification

                        frameworks is one of the main program intervention areas for improving industry competitiveness.

                        Program efforts therefore continued to focus in this area in the reporting period and resulted in the

                        code for Good Manufacturing Practices (GMP) being approved as an official industry standard. A Good

                        Manufacturing Practices for the dairy industry was approved as an official Kenya Bureau of Standards

                        industry standard in the reporting period. This standard forms the basis for Good Manufacturing

                        Practice training for Milk Collection centers, Milk Bars/Shops and Milk Processing Plants staff and

                        personnel that will begin in the second quarter of 2010. The program will now commence training of

                        1250 actors along the value chain and have compliance to the standard as a requirement for licensing.

                        The text of the proposed Dairy Regulations was finalized, having been approved by a public committee

                        representing the concerned government ministries and associated dairy industry organisations. The

                        Dairy Regulation has been submitted to Kenya Dairy Board for legislation as a sub-regulation under the

                        Kenya Dairy Act. Kenya Dairy Board will submit the text to the Ministry of Livestock Development

                        (MoLD). When legislated, the dairy regulation will form the basis for quality assurance throughout the

                        dairy industry. A related achievement in the quarter included completing the final text of a readerfriendly

                        Code of Hygiene for the industry.

                        This now takes the total number of quality certification frameworks developed by the program to three

                        (GMP Code, Dairy Regulations and the Code of Hygiene). The program has now surpassed the program

                        target of two quality certification frameworks developed. Focus now shifts to advocating for

                        implementation/enforcement through the relevant industry bodies, mainly the KDB.

                        Other achievements in the quarter included completing the final text of the Code of Hygiene:

                         Developed Scope of Work (SoW) and selected a consultant to carry out a consumer preference

                        survey for dairy products: The KDSCP team developed a Scope of Work (SoW) and recruited a

                        consultancy firm to carry out a consumer preference survey as a towards dairy products market

                        promotion/ consumption campaign. Seven bids were received, reviewed and the assignment

                        awarded to ESADA. The objective of the exercise is to assess consumer perceptions on existing

                        dairy products and assess their preferred sources of the same. The findings of the assessment

                        will inform the interventions needed for market promotion. The exercise should be finalized by

                        end of Quarter 2.

                         The program contracted a consultant – Vedaman Consultants – to work with the technical

                        working group appointed by the Permanent Secretary, Ministry of Livestock development to

                        develop the Dairy Master Plan in the quarter. The consultant is currently in the field collecting


                        stakeholder views. Once finalized, the Master Plan will provide the technical direction for the

                        industry and make it competitive.

                         Completed the final text of a reader-friendly Code of Hygiene for the industry, and the

                        successful completion of the dairy regulations.

                        2.1.4 Continued facilitating meetings of the National Dairy Task Force and the Regional

                        Working Groups

                        The KDSC program supported the DTF's national Dairy Stakeholders Forum in the reporting period.

                        The National Dairy Stakeholders' Forum was organized with an aim of enhancing competitiveness in the

                        dairy industry through stakeholder interaction, networking and development of sustainable alliances

                        across the value chain. The theme of the forum was "creating synergies for dairy development". The key

                        note address was given by the Minister for Livestock Development Hon. Mohamed Kuti.

                        Hon. Kuti officially opened the forum in Nakuru A section of participants at the stakeholders' forum

                        held in Nakuru

                        In his speech, the minister recognized the role of the National Dairy Task Force in bringing together

                        stakeholders to chart ways of enhancing synergy in developing the industry. The Minister noted that the

                        impressive performance in the dairy industry could not have been possible without linkages between the

                        various players in the industry which has led to the improved efficiency in the production, supply and

                        marketing chain. He also noted the potential the industry has in extending beyond traditional dairy

                        producing areas, noting that the North Eastern region is able to transport over 300,000 liters of milk

                        per day to Nairobi even without the requisite infrastructure to support this production. He therefore

                        noted that the creation of synergy by the coming together the various stakeholders has the potential of

                        building on these new areas of industry expansion.

                        Presentations during the forum focused on the role of the various stakeholders in enhancing the

                        competitiveness of the dairy industry. These included government institutions, development partners,

                        and the private sector. Participants were also taken through the new developments in the industry and

                        briefed on progress on the action plans developed at the KDSCP preparation phase and approved by

                        stakeholders in October, 2008 when the program was officially launched.


                        Participants gave their feedback by identifying issues that were of most interest to them, what they

                        would like to see in future meetings and key issues that need immediate action. Participants' views

                        varied widely but the issues most commonly quoted as being of interest to the participants were;

                         Opportunity to get an overview of the industry and the opportunity to network with other


                         The demonstration of an integrated dairy management information system.

                         Presentation of successful models of development in the industry such as the dairy business

                        hubs approach for enhancing milk marketing and service delivery by EADDP and the milk-shed

                        approach by KDSCP.

                        For future meetings, participants also expressed varying issues but the most common issues raised


                         More time for the meetings. A number of participants felt that the forum should be held for 2

                        or 3 days.

                         Farmers should be given an opportunity to share their experiences.

                         Meeting should be action oriented, reporting action taken since the previous meetings and

                        charting the way forward

                        The issues that need immediate implementation were identified as;

                         Expansion and support for AI services across the country and focus on breeding as a whole

                         Implementation of the policy framework

                         Implementation of the integrated management information system.

                         Implementation of disease-free zones

                        During the discussion sessions, most participants indicated strong support for the stakeholders' forum

                        and demanded for an annual or biannual frequency of meetings with a more action oriented focus. This

                        fits in well with the National dairy task force system of sub-committees that can now feed into the

                        issues identified and report progress in the next forum. Recommendations for the various

                        subcommittees are summarized at the end of this report.

                        In addition, the holding of a successful national dairy stakeholders forum with the consequent demand by

                        stakeholders that this becomes a regular biannual event can be seen as a key step in building a sectorwide

                        institutional framework that coordinates and provides leadership to enhance sector-wide synergy

                        and thereby increase the industry competitiveness. However, the linking of the national level to regional

                        and local milk-shed levels remains as a critical gap in the institutionalization process. The consultants'

                        recommendation to fill this gap is therefore;

                        Creation of a national dairy task force coordinating subcommittee supported by consultants that will be

                        mandated to do the following;

                         Integrating national level activities to the regional and milk-shed levels.

                         Ensuring there is adequate information flow vertically from the grassroots to the national level

                        and vice versa.

                         Providing capacity building input at all the levels to ensure that there is understanding at all

                        levels on the co-operation versus competition paradigm that this process is hinged on. This is

                        especially critical at this stage of growth because the natural instinct in value chains is refusal by

                        stakeholders to cooperate in the mistaken belief that this may give undue advantage to



                         The subcommittee will therefore be mandated with attending the milk-shed and regional

                        working group meetings and report recommendations to the national dairy task force while

                        taking the opportunity to share with the regional and local levels the recommendations and

                        decisions of the national level.

                        Participants included representatives/officials from all the key sector institutions, including the Ministry

                        of Livestock ( all departments), the Kenya Dairy Board; processors in the country (the Dairy Processors

                        Association interim committee was represented); the Ministry of Cooperatives; development partners,

                        including Mespt, TechnoServe, Heifer Project International, SITE, SNV, EADDP, KDSCP, AKFEMA;

                        breed companies including Coopers, ABS, CAIS, SEMEX; research institutions- KARI, University of

                        Nairobi; financial institutions; service providers including input suppliers, equipment suppliers, machinery

                        suppliers; farmer representatives from all the milk sheds; federation leaders; and milk shed /regional

                        working group leaders, among others.

                        The KDSC program has started work on an Integrated Management Information system that will

                        enhance information sharing among stakeholders. Other recommendations are now being looked into

                        by the various subcommittees of the Dairy Task Force and progress will be reported in future reports.

                        Other related activities supported by the program in the quarter include facilitating

                        meetings of three Regional Working Groups, six milk shed working groups and two Dairy

                        Task Force meetings. The meetings addressed a number of industry issues with the main

                        one being a resolution to push for the introduction of alternative acaricides to control tick

                        borne diseases to guard against development of resistance to acaricides currently in the

                        market. Other resolutions were rehabilitation of dams with the support of the

                        Constituency Development Funds (CDF) in Kinangop and Lessos milk sheds, need for

                        small SBOs to federate in Kericho and Trans Nzoia milk sheds, among others. Program

                        support in facilitating these meetings enabled leveraging of an estimated $978,000 in nonproject

                        resources through collaborations with other sector players in the reporting period. This was achieved

                        through stakeholder contributions to sector initiatives – both in-kind and monetary. A significant

                        proportion was realized from farmers' participation in program organized events. This also included 2

                        coolers: one cooler was donated by International Organization for Migration (IOM) for Cherangani

                        Dairy Group (10,000 lt) and another donated by Ministry of Special Programs to Naitiri Dairy

                        Cooperative (5,000ltrs).


                        2.2 Component 2: Develop Dairy Smallholder Business Organizations (SBO)

                        The KDSC program continued implementing action plans developed by stakeholders to build capacity of

                        the Smallholder Business Organizations (SBO) and to increase farm level productivity. Cumulatively,

                        seventy-three farmer groups have had their capacities built compared to the target of 50

                        groups by end of year two of program operations. These include 70 Smallholder Business

                        Organizations (SBOs)/Cooperatives/Bulking centres and three sector-wide farmer organizations. We

                        aim to surpass year three target (75 producer groups strengthened) by end of quarter 2 when we

                        recruit additional SBOs in to the program. Accomplishments in the reporting period are discussed


                        2.2.1 Facilitated capacity building of SBOs working with the KDSCP program

                        Program interventions centered on four key activities in the reporting period:

                        Provision of technical assistance in producer group formation and registration

                        The KDSC program provided technical assistance in producer group formation and registration, as well

                        as training in group leadership and governance to seven (7) new SBOs in the reporting period, for a

                        cumulative total of 70. The SBOs include Abardare East (Gatanga Milk shed), Umoja dairy (Kericho Milk

                        shed), Three Ton Dairy (Lessos milk shed), Meebot, Bamwai, Taito, and Wamuini (Trans Nzoia Milk

                        shed). The program also provided market information and technical assistance that aided the

                        development of market linkages with traders, processors and other bulk purchasers of milk to ensure

                        that the milk produced reaches the market for these new groups. These efforts has now enabled over

                        3500 dairy farmers access better markets that pay better prices than what they used to get for their


                        As indicated in previous reports, farmers selling individually are paid lower prices than those bulking

                        because of higher transaction costs incurred by processors, especially transport costs. In Abardare East

                        for example, farmers say they used to be paid Kshs. 15 per liter of milk. Member farmers have since

                        been linked to a farmer marketing federation in the milk shed and are currently being paid Kshs. 27 per

                        liter of milk, a more than Kshs. 10 rise in income per liter. The same farmers have also been linked to

                        input suppliers who supply them feeds on a check off system.

                        Reorientation of operations in farmer groups

                        The program aided the development of strong and business-oriented smallholder dairy cooperatives in

                        the quarter. This has enabled the groups to provide members with access to appropriate inputs

                        (including artificial insemination services, feed concentrates and supplements, animal health products,

                        etc.); collect, bulk, and market farmers' milk competitively; leverage credit facilities; and provide forums

                        for farmer-education that enhance dairy productivity.

                        While the program continues to promote supply of production inputs and services on a check off basis

                        to member farmers by groups, program facilitated business/operations analysis indicate that this

                        sometimes comes at a very high cost to farmers. The program therefore promotes linking private

                        providers to the groups, who then supply these inputs and services to farmers and get paid by the

                        farmer groups.

                        In the reporting period, Suka Cooperative in Nakuru Milk shed was linked to a feeds manufacturer. The

                        514 farmers affiliated to the cooperative are now able to access animal feeds on credit and

                        pay by end of month. This will increase efficiency and reduce operational costs of the

                        group, resulting in increased incomes (price paid per liter of milk) to member farmers.


                        Training of committee members of farmer groups

                        The program carried out training for management committees of 22 farmer cooperatives in the quarter

                        through business performance review workshops, training in business and financial management,

                        commercial/co-operative law, dairy record systems, milk-cooling operations, artificial insemination

                        project management, and merchandise management. All famer groups working with the program

                        have now had their committee officials trained. This is expected to improve management

                        at the farmer group level, resulting in greater benefits to member farmers. The cooperative

                        officials have also taken through the revised cooperative act and given copies of the act as well as

                        manuals on management.

                        Development of strategic and business plans for the second set of farmer groups working with the


                        Program facilitated capacity and performance assessment findings indicate that most of the SBOs do not

                        have well-thought out strategies to enhance their growth and development and achieve member

                        satisfaction (read strategic plans). In addition, the principles of cooperative management are poorly

                        applied and most groups do not have business plans. The KDSC program has therefore been facilitating

                        the development of strategic and business plans for farmer groups as a first step towards enhancing

                        operations and improving profitability of farmer groups in all milk sheds. In the reporting period, 10

                        cooperatives in Kinangop milk shed had their strategic plans finalized, and a further 8 groups finalized

                        business planning in Kericho milk shed. This now brings the total number of groups with strategic

                        plans to 14. The remaining 56 groups are projected to finalize their plans by end of the year.

                        2.2.2 Facilitated capacity building of 12,200 dairy farmers in the quarter

                        Program interventions focused on training dairy farmers in the operational zones to equip them with

                        necessary technical skills to increase herd productivity and incomes. The training forums, organized in

                        collaboration with key stakeholders such as private service providers, Ministry of Livestock extension

                        personnel, Kenya Dairy Board, covered diverse topics such as feed/fodder production, appropriate

                        feeding regimes, feed conservation and formulation, modern breeding techniques and milk handling

                        hygiene. A key emphasis area is on-farm demonstration on feed conservation techniques to enable

                        smallholders conserve feed in wet seasons (when feed is abundant) for use in the drier parts of the year.

                        The program has facilitated a number of Training of Trainer (ToTs) kind of sessions for private service

                        providers to enhance wider outreach to farmers in targeted areas as an embedded service with

                        considerable success. The section below reviews a sample of activities undertaken in the reporting

                        period and the results realized.

                         The program and its collaborators, including a pool of experienced dairy service providers,

                        organized and facilitated various learning platforms to educate farmers on the best animal husbandry

                        practices. Seminars, field days and on-farm demonstrations were conducted on a range of dairy

                        related areas such as foliage production, feed conservation, clean milk production and good animal

                        husbandry practices. Smallholders from some farmer groups also had opportunity to participate in

                        farm and daughter tours, whereby farmers from one region would visit successful farmers (trainers)

                        in another region with similar agro-ecological conditions to see for themselves and learn the best

                        dairy herd management practices. In this quarter, 12,200 farmers have been reached with direct

                        trainings provided through these forums. This now takes the total number of farmers trained over

                        the life of the project to 36,736.


                        Farmers attending the forums have

                        been keen to learn about

                        conservation and utilization of maize

                        stove and enrichment with urea and

                        molasses, ensiling, among other feed

                        conservation practices. The

                        smallholders have reported enhanced

                        efficiency in utilization of feeds and

                        storage to meet feed scarcity in

                        periods of adversity, a common

                        occurrence due to unreliable weather

                        patterns witnessed in the previous

                        years. Approximately 36% of the

                        farmers now conserve feeds as

                        compared to 11% at the

                        beginning period. Program

                        activities targeting milk quality

                        enhancement through the

                        training of farmers has also

                        started bearing fruit as shown in

                        Box 1.

                        Perhaps the most outstanding

                        outcome of the farmer trainings is the

                        uptake of Artificial Insemination in

                        breeding in areas where most farmers

                        were using bulls in breeding. Overall,

                        the proportion of farmers using

                        artificial insemination has gone up and

                        now stands at 56% of farmers

                        participating in program compared to

                        40% at the start of the program. In

                        Kericho, the proportion now using AI

                        is 50%. In Trans Nzoia, they average

                        40%. Officials of farmer groups and

                        service providers in the area cite

                        increased business as a result of the

                        KDSCP intervention, especially those

                        who have been linked with the farmer

                        groups. The Agricultural

                        Development Corporation (ADC)

                        the distributor of semen in Trans

                        Nzoia Milk shed recorded a 21%

                        increase in volume of semen moved

                        between March and October, 2010 as

                        shown below.

                        Box 1: Program intervention on improving dairy

                        product quality yields benefits in the most

                        unlikely of places – farm level

                        The Kenya dairy sector competitiveness program

                        (KDSC) considers the quality of milk reaching the

                        market as the key to helping the industry be

                        competitive locally, in the region and internationally.

                        We have therefore invested considerable resources in

                        training the Kenya Dairy board (KDB) inspectors on

                        Pasteurized Milk Ordinance, regulatory inspection, and

                        in reviewing industry standards and regulations to

                        enhance product quality and in farm level training on

                        milk handling and hygiene. Further, the program has

                        partnered with other industry players in encouraging

                        and providing information to value chain actors to

                        enable the purchase state of the art milk analyzers.

                        These efforts have started bearing fruit in the most

                        unlikely of places – at the farm level.

                        In the past, farmers have often complained of

                        conspiracies to reject milk especially in the rainy season

                        (like currently experienced) when there are surpluses.

                        Some stakeholders have argued that processors often

                        change their testing parameters, especially where they

                        have written supply contracts with suppliers - farmer

                        groups/bulking centers. This seems to be changing,

                        especially where bulking centers have invested in milk

                        analyzers and the cooperative staff and farmers have

                        been trained on milk handling and hygiene. In Suka

                        Cooperative Society in Nakuru Milk shed, volumes of

                        milk bulked have risen considerably in the rainy season

                        – September 2009 to now - while the proportion of

                        milk rejected has remained zero. Farmer group officials

                        claim they test milk when collecting from the farmers

                        and reject milk that do not conform to the set

                        standards themselves. The group claim there is no time

                        the processor – Brookside dairy – has returned their

                        milk in the whole year and credits the program for this.

                        They say the KDSC intervention, especially helping

                        train1 their staff and farmers on milk handling and

                        hygiene has changed their fortune for the better.

                        While the severe drought experienced in the year may

                        have contributed to this, the cooperative officials

                        specifically mentioned program interventions, especially

                        training, as having helped them and farmers improve

                        milk quality.


                        Figure 1: ADC semen sales: March to October, 2009







                        Mar Apr May Jun Jul Aug Sep Oct

                        Source: ADC AI Centre

                        The program activities in this component have realized two key benefits, i.e., increased milk volumes

                        marketed through the cold chain (Figure 2), and linked farmers to product markets and thus enabling

                        them to increase their revenues/earnings (Box 2).

                        Figure 2: Milk sold to processors in Trans Nzoia Milk shed: April –November, 2009

                        Box 2: Collective marketing enabling a community ravaged by war to create wealth

                        through dairy farming (narrated by the farmer group chairman)

                        Meebot Dairy co-operative began as a maize-growing group after receiving one million Kenya shillings

                        from Agricultural Development Corporation in 2008, but the project could not take off following the

                        change in the climate; as a result, the project was frustrated. In March 2009, we heard of the launch of

                        KDSCP, which we attended and thereafter registered with the program and from that time we have

                        never looked back. We travelled to Nairobi in June to attend the breeders' show, and what we saw in


                        Nairobi changed our lives given that some of the dairy animals exhibited there were from ADC, which is

                        in our neighborhood in Kitale, Trans Nzoia milk shed.