to build informed societies that are better able to avoid the pitfalls of the past

TO BE NOTED: From the Guardian:

"Preparing for Africa's boom

This charter could help nations profit from their resources, rather than being undermined by them

• 
• • Paul Collier
  • The Guardian, Monday 25 May 2009
  • Article history

'Never again" is, of course, a ­sentiment that is now ­widespread in economic policy circles. I hear it too from Africa's ­economists, but then it refers to the resource curse.

The global commodity boom that ended abruptly in September was the second since African independence. Africa has yet to diversify from dependence on primary commodity exports, so these booms were huge opportunities, pumping far more money into some governments than aid will ever do. Last year, Angola alone received from oil and diamonds more than double the entire aid inflows to Africa. The first commodity boom, in the 1970s, was in large part an opportunity missed. Indeed, far from being harnessed for sustained development, it sowed the seeds of decline. It doesn't have to be like that: Botswana succeeded in using diamond revenues to lift the society out of poverty. But for every Botswana there are several Sierra Leones. In the short term, a commodity boom always helps the economy, but the long-term impact depends on policy choices. These usually go wrong: the norm is that they undermine economies rather than build them up.

Having blown its first commodity boom, Africa had to wait 20 years for the second. It may have blown that one as well, although the jury is still out. That is what "never again" is about when voiced by people such as Louis Kasekende, the chief economist of the African Development Bank. Before the next boom, African societies must get prepared. So what does being prepared actually mean?

Transforming assets beneath the ground into sustained prosperity for ordinary citizens requires integrity and astuteness. Without integrity the assets get looted, and without astuteness they get squandered. Neither is easy to achieve, but integrity is at least easy to understand. The Extractive Industries Transparency Initiative (EITI) is an international standard to which governments can make a commitment. Introduced in 2003, it was the right place to start in the struggle to break with the past. But it would be the wrong place to stop: ­integrity is not enough.

Enter the Natural Resource Charter, an attempt by academic economists, lawyers and political scientists to distil professional knowledge into a form readily accessible to governments and societies in resource-rich countries. It is distinctive both in content and process.

The content tries to do for astuteness what the EITI has done for integrity. Its summary version is a list of 12 precepts spanning the chain of decision. It covers management of the discovery process, taxing extraction companies, investment, and how rich countries could be more supportive. Anyone, even the busy president of a resource-rich country, can spare the few minutes it takes to digest. A fuller version is designed as a citizen's guide – say, for a broadcaster on community radio wondering whether that deal her government just struck with an extraction company is likely to be a good one. The full monty version is for practitioners: the permanent secretary in the ministry of mining can find out about why auctioning off concessions is likely to generate a better deal for the country than relying solely upon negotiation.

The process of putting the charter together has been a cross between the EITI and Wikipedia. An international group of academics worked together, without official sanction or finance. We consulted with likely stakeholders, holding meetings around the world as best we could, and incorporating scores of suggestions for revision and improvement. Revision will continue. For this reason, unlike the EITI, the charter is not designed as a com­mitment. The objective is not to get governments to sign an endorsement but to build informed societies that are better able to avoid the pitfalls of the past.

Depending on your world view, for academics to provide this unsolicited advice to resource-rich societies is neo-colonial arrogance, a delusional distraction from our proper jobs, or potentially useful. Ten years ago it would not have been feasible: change always had to come from governments. Now the internet has opened up a new way of achieving better policies. Citizens get up to speed on issues previously considered too technical, and governments have little option but to follow along behind. For many low-income societies with valuable natural assets, turning "never again" from resolve into reality is the critical challenge of the next decade."

The problem with all this issuance materializing is that it completely cannibalized demand

TO BE NOTED: From Bloomberg:

"World Bank Bonds Show What Happens in State Rescues (Update1)

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By Gabrielle Coppola

May 1 (Bloomberg) -- Federal guarantees by 13 countries on more than $400 billion of financial company bonds are punishing the AAA-rated World Bank Group with record borrowing costs -- an indication of what can go wrong when government gets in the way.

The Washington-based World Bank, founded in 1944 to rebuild economies after World War II, sold $6 billion of three-year notes March 26 priced to yield 30 basis points more than the benchmark for such borrowings. The so-called spread was the widest for a dollar-denominated bond offering by the supranational lender, said George Richardson, the institution’s head of capital markets, in an interview.

Just seven months ago, the World Bank paid a record low 35 basis points less than the midswap rate, a market measure for exchanging fixed- and floating-rate cash flows. The sudden rise in World Bank relative bond yields is an unintended consequence of sales of taxpayer-backed debt by more than 50 companies, including Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. While these special offerings were designed to bring stability to the credit markets after $1.4 trillion in losses and writedowns in the past 28 months, no one realized the World Bank would be depreciated by such government policies.

“Governments started announcing guarantees for their banks, and then the whole world changed,” said Richardson, a former Goldman Sachs banker.

Rising Sales

Rising risk premiums are also affecting the Washington- based Inter-American Development Bank, which lends to Latin American and Caribbean countries, and Germany’s state-owned Kreditanstalt fuer Wiederaufbau, whose credit supports housing, education and small business.

Banks and financial companies worldwide sold 320 billion euros ($424 billion) of state-guaranteed debt since October, denominated in euros, dollars and U.K. pounds, according to Leef Dierks, a fixed-income analyst at Barclays Capital in Frankfurt.

They may issue a total of 900 billion euros in bonds for all of 2009, Dierks said.

The total includes $235 billion of dollar-denominated debt in the U.S. with backing from the Federal Deposit Insurance Corp. as of yesterday, according to data compiled by Bloomberg.

Lenders backed by multiple governments, known as supranationals, have the flexibility to borrow billions in multiple currencies and at any part of the yield curve, making their bonds among the most liquid securities.

Financial Acumen

The financial acumen of the World Bank, which pioneered the first use of derivatives to obtain Swiss francs and German marks by exchanging cash flows with International Business Machines Corp. in 1981, hasn’t protected the institution from widening borrowing spreads.

Average yields relative to midswap rates on dollar- denominated supranational debt rose to 164.4 basis points, as of yesterday, from 46.8 basis points at the start of October, according to the Credit Suisse Liquid U.S. Corporate Sovereign Spread Over Swap index.

The midswap index, which contains bonds sold by the World Bank and the IADB, reached a record-high of 217.4 basis points on Jan. 2, Credit Suisse data show. A basis point is 0.01 percentage point.

A benchmark for borrowers, the midswap index lies between the bid and asking yields on contracts exchanging fixed for floating interest-rate cash flows.

Double Borrowings

The World Bank, whose projects now include financing AIDS prevention in Botswana and education reforms in Brazil, will more than double borrowings to as much as $35 billion this year to help provide food, health and education services through the International Bank for Reconstruction and Development, Richardson said.

Robert Zoellick, the bank’s president, recently announced plans for $100 billion of new loans over the next three years to relieve the recession. The lender issued $1.5 billion of five- year notes on Oct. 1 at 35 basis points below the midswap rate, a record low for that maturity, according to Richardson.

The International Monetary Fund, a Washington-based agency of the United Nations that monitors the global economy, may sell its first bonds to China and Brazil to raise money to combat the downturn. IADB borrowings will total $15 billion to $20 billion this year, up from $6 billion to $7 billion in 2007 and $11 billion in 2008, said Soren Elbech, the bank’s treasurer.

“There is a major crisis going on, and institutions like ourselves have been asked to step up to the plate and use our financial strength and pass it on to the regions that we cover,” Elbech said. “The IADB is heeding that call.”

Colombia’s Borrowing Costs

The benefit provided by development bank lending compared with borrowing private capital has increased as credit markets seized up, sending yields relative to Treasuries on emerging market debt to a six-year high.

Colombia, which received a four-year, $4 billion credit line from the World Bank last month, sold $1 billion of 10-year notes at 458.5 basis points above Treasuries April 14. That compares with 10-year notes Colombia sold in July 2006 at 229 basis points over Treasuries, Bloomberg data show.

Developing countries “are all in a position where they’re not going to welcome an increase in borrowing costs,” said John Williamson, a senior fellow at the Peterson Institute for International Economics in Washington. “But it’s not as bad as not getting the credit you need.”

While development lenders’ spreads more than tripled since October, the yield premiums on World Bank and other supranationals’ bonds have narrowed since their sale as corporate credit markets begin to heal.

Passed On

The three-year notes sold by the World Bank on March 26 rose to 100.4 cents on the dollar as of yesterday to yield 50.8 basis points more than Treasuries, according to Bloomberg data. That’s down from 82.2 basis points when they were issued.

Spreads on the IADB’s five-year notes sold April 13 fell to 109.8 basis points over Treasuries as of yesterday, from 140.25 basis points at their sale.

Increased financing costs are being passed to borrowers, according to Horst Seissinger, head of debt capital markets at Frankfurt-based KfW, which has a direct guarantee from the German government.

“What we are doing is what all the banks have to do,” he said. “The interest rates for the loans we grant to our customers have to reflect the re-pricing we have seen in capital markets over the last few months.”

Nathalie Druecke, a spokeswoman for the bank, said she couldn’t specify which projects are paying more because of the cost increase.

Energy-Efficiency Projects

KfW’s increased borrowing costs aren’t reflected “on a one to one basis,” in its lending, she said.

Development lenders face higher costs than the AAA-rated World Bank. IADB, which last month said it’s supporting $2 billion in Latin American and Caribbean energy-efficiency projects with the Export-Import Bank of Korea, paid 83 basis points more than the midswap rate on notes sold April 13 and due in 2014, according to Bloomberg data. That compares with 24 basis points below the benchmark on similar debt sold in February 2008.

KfW, a sovereign agency, sold $4 billion of notes due 2014 on March 3 priced to yield 162.8 basis points more than similar- maturity Treasuries, or 95 basis points over midswaps. The bank paid 83.5 basis points more than Treasuries, or 20 basis points less than the midswap rate on five-year debt sold in July, Bloomberg data show.

Supranational borrowers’ costs “went from the best of times to the worst of times within a matter of weeks,” said Daniel Shane, head of Morgan Stanley’s supranational and sovereign debt syndicate in London. “The problem with all this issuance materializing is that it completely cannibalized demand.”

Unlock Credit Markets

Banks began issuing government-backed debt on Oct. 22, when Barclays Plc of London sold 3 billion euros of three-year notes. The guarantees were intended to help unlock credit markets, which had been effectively shut since the bankruptcy of Lehman Brothers Holdings Inc. a month earlier.

New York-based Goldman Sachs opened the market for FDIC- backed debt on Nov. 25, issuing $5 billion of three-year notes. With top AAA rankings, they were priced to yield 200 basis points more than similar-maturity Treasuries, according to Bloomberg data.

Bank of America, based in Charlotte, North Carolina, is the biggest user of the FDIC program, raising $41.7 billion of dollar-denominated debt since Dec. 1, Bloomberg data show.

Michael DuVally, a spokesman for Goldman Sachs, and Scott Silvestri, a Bank of America spokesman, each declined to comment.

Temporary Program

“Credit market conditions have improved in response to government stabilization efforts such as the TLGP,” Andrew Gray, an FDIC spokesman, wrote in an e-mailed statement.

“The FDIC has taken steps to reduce reliance on this program, including establishing the deadline of Oct. 31, 2009 for any new issuances,” Gray wrote. “Clearly this is not a program that will exist in perpetuity.”

Worldwide losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010, prompting private banks to further curtail lending, the International Monetary Fund said in an April report.

The IADB, which may approve a record $12 billion of loans to finance projects and enhance social programs in 2009, has raised lending rates, Elbech said. He wouldn’t elaborate.

Borrowers from the World Bank are still paying about the London interbank offered rate, the same as a year ago, according to Richardson. The institution’s cost of new debt hasn’t yet affected the overall average yield on existing bonds, Richardson said.

Libor is the rate banks say they charge each other for loans. It was set at 1.02 percent yesterday for three-month credit.

“If we’re going to be issuing at these wider, above-Libor spreads for a while, then you’ll see that lending rate move slowly higher,” he said.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net"

"it is local and international aid workers and non-political social activists who will likely be the real agents of change in Zimbabwe in 2009."

Checking in on Zimbabwe. From the Guardian:

"What does 2009 hold for Zimbabwe?

Will a government of national unity, if finally formed, be the solution to the country's problems?

Comments (11)

• 
• • Knox Chitiyo
  • guardian.co.uk, Sunday 4 January 2009 12.00 GMT
  • Article history

As Zimbabwe limps agonisingly into 2009, there is one immediate question which the MDC has to answer; will they join the still notional government of national unity, or not? Morgan Tsvangirai stated that unless well-known activists Jestina Mukoko and other civil society and opposition figures are released, he will ask the MDC's national council to suspend negotiations.

After the tumultuous silence following their abductions, Mukoko and her co-accused were suddenly produced, rabbit–style, out of the police hat. Allegedly, the accused were involved in the recruitment and training of saboteurs to overthrow Robert Mugabe from bases in Botswana. Even if this were true( COME ON ) – and there is as yet no wisp of evidence to support the state's case – the inhuman treatment of the activists is utterly unconstitutional and goes far beyond any crimes they have supposedly committed( IS THIS A SURPRISE ? ). If the MDC wish to give force to their ultimatum, they should not allow themselves to be steamrollered by Zanu-PF, South Africa and Southern African Development Community (SADC), into joining a Government of National Unity (GNU) just so they can all feed from the same trough.( AMEN )

"Operation Chimumumu"

Here's what that is:

"MARONDERA – Zanu (PF) has launched “Operation Chimumumu” - a nationwide campaign aimed at eliminating MDC officials and activists and some staff of targeted NGOs – in a desperate attempt to force MDC President, Morgan Tsvangirai, into a marriage of inconvenience.
The MDC has continued to resist being pressurized into the formation of an inclusive government in which Robert Mugabe continues to wield all the power – in contravention of the letter and spirit of the agreement signed in Harare on September 29.
Thirty armed men are reportedly being accommodated at a house owned by a senior Zanu (PF) politburo member in Winston Park, Marondera. The gunmen are allegedly dressed in riot gear and have been arresting locals before whisking them away to killing zones.
Mugabe and his military junta continue to thwart the legitimate power-sharing demands of the MDC - with the connivance of former South Africa president, Thabo Mbeki, and other undemocratic regional leaders."

The post continues:

"– the late 2009( 2008-DON ) assault on opposition and civil society activists by the Police and Central Intelligence Organisation (CIO) – is part of the carrot and stick strategy; the carrot is the shiny new passport for Tsvangirai (and the promise of a seat at the edge of the high table as Prime Minister if he plays ball). The stick is the inevitable arrests, abductions and torture of opposition and civil society activists and the threat of worse to come if the MDC does not co-operate( YES ). Oddly enough, Zanu-PF may have given the opposition succour in making their choice. High court judge Yunus Omerjee ordered the immediate release of most of the accused. He also ordered that they be given access to proper medical treatment (many of them bear the signs of torture( TORTURE ) ), full access to lawyers, and normal visitation rights. Instead, the state has placed them in the notorious Chikurubi maximum security prison – a facility originally designed for the most violent criminal offenders.

There are other issues which need to be resolved – the ministerial posts, the governorships and the question of who will control the finances. But both MDC groups should insist on an unconditional end to political violence as a precursor to a GNU. Zanu-PF has alleged that the MDC is training military recruits in Botswana. If this is the case, then indeed the MDC has a case to answer; but Zanu-PF has not yet produced any proof. There is currently a SADC investigation into these claims. The MDC should insist that the findings be published before any GNU is formed, otherwise it will simply be yet another stick that they will be beaten with( LITERALLY ). The state is also making a distinction( UNREAL ) between humanitarian politics and human rights politics. Humanitarian aid organisations have been allowed ingress into Zimbabwe's blighted communities; human rights activists, in contrast, have not been spared the rod. The MDC then, if it were to join a GNU, would need to be aware of what it was getting into. It can hardly be part of a coalition government while civilians are being abducted and killed. There is no "acceptable" level of political violence, and the GNU cannot be Zimbabwe's redemption if the drums are beaten on human skin.( TRUE )

And what of military intervention? I don't see it happening. The most common suggestion is a military invasion of Zimbabwe from, or by, a neighbouring country (possibly Botswana)( I'D BE FOR IT ). Idi Amin's removal by Tanzania's Julius Nyerere in 1979 is cited as a useful precedent. There are many similarities between Mugabe's Zimbabwe and Amin's Uganda; a brutal leadership, a broken economy, the flight of millions, and a restive military. But there are some vital discrepancies – Amin provoked Tanzania and sent Ugandan forces into his neighbour's country in a hunt for Ugandan "dissidents". Mugabe has been very careful not to overstep the mark in his war of words with Botswana, and it would be difficult for the Botswana Defence Forces or other neighbouring country to justify invading Zimbabwe, other than in self-defence( A FAIR POINT ).

That leaves the UK and the United States to mull the challenge of direct intervention( NOT A GOOD IDEA ). This won't happen; UK and US forces are at full stretch in Iraq and Afghanistan, and the Caucasus and Middle East will always be considered more important than Africa; there is also little public or state appetite further military adventures in far away places. It would be a huge operation and there is little indication that anyone is willing to pay the costs. In addition, humanitarian military intervention is best applied when civilians are clustered in readily identifiable camps or zones which can be cordoned off and protected by an international mission. This is not the case in Zimbabwe at the moment – although there has been tremendous dislocation, most people are still in their rural or urban homes, and this makes it difficult to imagine how an operation such as this would work. More importantly, at the first intimation of a major military offensive against it, the security sector in Zimbabwe would target the opposition leadership for elimination or for use as hostages.

This is not to say that Zanu-PF will not face a military threat. Growing dissatisfaction within the rank and file of the security establishment, increasing indiscipline and possible small-scale mutinies might be complemented by a possible "third force" of anti-state military operatives beginning a campaign of violence if the politics remain unresolved. This third force, if it comes into being, would be a threat to both Zanu-PF and the MDC. It would not be an MDC organisation, but its existence would be used by Zanu-PF to justify further repression. For Zanu-PF, an open military challenge would bind supporters together, but it would also widen the fissures in the security sector periphery and lead to overstretch.

The year 2009 will start the way 2008 ended; with the Zimbabwe question unresolved. Zimbabwe will be on the SADC agenda in its January meeting, and it will also feature at the UN Security Council meeting early in 2009. Although the regime v opposition polemic will continue, for ordinary people what really matters is how their daily lives can be transformed for the better. In this regard, it is local and international aid workers and non-political social activists who will likely be the real agents of change in Zimbabwe in 2009."

A sad but realistic appraisal. We could do more. Certainly South Africa could.