COMESA (Common Market for Eastern and Southern Africa) Business Forum for the Signing of Interim EPA

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• COMESA (Common Market for Eastern and Southern
  Africa) Business Forum for the Signing of Interim
  EPA
• Mauritius 27-28 August 2009
• Trade in services, trading into the future in the
  region
• Trade and Investment in Services Sector in
  COMESA the view of the European companies and
  opportunities for ESA companies to link up with
  European investors
• Pascal Kerneis, Managing Director
• ESF (European Services Forum) 

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CONTENT

• WHAT IS ESF
• THE IMPORTANCE OF SERVICES IN THE ECONOMIES AND
  OF INTERNATIONAL TRADE IN SERVICES
• THE IMPORTANCE OF FDI IN SERVICES SECTORS
• THE PARTICIPATION OF ESA EAC COUNTRIES TO TRADE
  IN SERVICES NEGOTIATIONS

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• ESF covers most services sectors, including
• Insurance
• Banking
• Business services IT Computer consulting,
  advertising, after-sales services
• Professional services legal services,
  accountants, architects, engineers
• Construction services
• Distribution services
• Postal Express Delivery services

• Audio-visual services
• Energy related services
• Environmental services
• Telecommunication services
• Tourism
• Air Transport
• Maritime Transport
• But no members in Education or Health services

For more information, see www.esf.be
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ESF MEMBERS INCLUDE
For more information, see www.esf.be
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Agriculture
Industry
Services
The Services sector generates 90 of new jobs in
the EU15 
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World EconomyPercentage of GDP by Sector, 2006
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Importance of the Services Sector in the Eastern
and Southern Africa Region

• Burundi services 34.1 (2006 est.) (EAC)
• Comoros services 56 (2001 est.)
• Djibouti services 59.6 (2003 est.)
• Eritrea services 64.6 (2006 est.)
• Ethiopia services 40.4 (2006 est.)
• Kenya services 65 (2004 est.) (EAC)
• Malawi services 47 (2006 est.)
• Mauritius services 69.7 (2006 est.)
• Madagascar services 27.2 (2006 est.)
• Rwanda services 37.3 (2006 est.) (EAC)
• Seychelles services 66.7 (2006 est.)
• Sudan services 39.7 (2006 est.)
• Tanzania services 38,7 (2007 est.) (EAC)
• Uganda services 48.5 (2006 est.) (EAC)
• Zambia services 51.2 (2006 est.)
• Zimbabwe services 59.4 (2006 est.)
• except Tanzania EAC SADC

Source CIA The World Fact book
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EU International trade in Services(Trends in
volume Bio )
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Trade between Member States exceeds Extra-EU trade
679.6bn
498.5bn
Source Eurostat TOTAL EXPORT (intra extra
1178.1 Bio )
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International Trade in Services
28.9
42.2
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ACP countries export already services in the EU
EU-25 International Trade in Services with non-EU
Countries 2004, EUR bn
Rank Country Trade Volume Exports Imports Balance
1 USA 221,394 116,284 105,110 11,173
2 Switzerland 77,016 43,934 33,082 9,921
3 Japan 29,255 18,927 10,328 3,798
4 Norway 22,125 12,961 9,164 2,758
5 China 16,050 8,786 7,264 1,522
6 Canada 15,287 8,062 7,225 8,37
7 Russia 14,872 8,222 6,650 1,572
12 South Africa 7,151 3,552 3,599 -48

All ACP Countries All ACP Countries 30,722 15,759 14,963 796
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• What International Trade in Services (ITS) does
  not include?
• The activities of the foreign affiliates within
  the country in which they are established are not
  taken into consideration ( part of local GDP),
  nor the self financed investments through
  benefits (reinvested earnings/income) (also
  local).
• The flow of capital involved in mode 3
  operations, i.e. the financing of the
  establishment of a new commercial presence in a
  foreign country This is included in the Foreign
  Direct Investment (FDI) accounts, not in the
  balance of payment, hence not considered as
  services exports.
• More than 65 of global FDI flows are invested in
  services sectors (see hereafter).

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Services contribute to the largest share of FDI
(1)
444,1 Bn were invested in Services sectors by
the EU in 4 years (63,6 of total 697,5 Bn )
(extra EU)
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93 of the investment coming to the EU are done
in the Services sectors
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The importance of private Foreign Direct
Investment in Developing Countries
Bio US /Year - Source UNCTAD FDI Report
World Bank
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IMPORTANCE OF SERVICES IN A SUSTAINABLE
DEVELOPMENT

• Attract FDI in Infrastructure services
• Telecoms, Express Courier
• Logistics (transports, distribution, etc.),
• Energy distribution network,
• Water and Waste management,
• Financial services System, etc.
• Experience shows that foreign service suppliers
  that invest in a country do it for a long period.

• Attract transfers of expertise and of know-how of
  foreign service suppliers, which in turn
  initiate
• Local jobs creations
• Staff vocational training, etc.
• Better quality of the services,
• Cheaper services,
• More choice for the consumers
• Reduction of the cost of doing business for local
  SMEs.

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• Why FDI is not coming to Africa? What is missing?
• Legal security for all investment is missing.
• This can be achieved through the binding of the
  domestic/autonomous legislation in the framework
  of a multilateral trade agreement (WTO) or a
  Regional (EPA or Bilateral trade agreement.
• This legal security is a crucial element for the
  services companies, but too often ignored by the
  governments.
• Foreign companies are reluctant or hesitant to
  invest time and money if the conditions of
  establishment or of doing business can be changed
  without notice (change of government, corruption,
  military coup, etc.).

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• List of criteria that a CEO looks at when taking
• a decision to invest in a developing countries
• Potential market (size, income per capita, follow
  the demand, i.e. corporate customers)
• Existing competition, special treatment for local
  players
• Benefits prospects at short, medium and long
  terms
• Good governance (level of corruption,
  transparency of the legislation, etc.)
• State of the regulation (existing barriers at all
  levels, independent regulatory authority,
  implementation of the regulations, i.e.
  Regulatory Certainty)
• FDI incentives (special zones, tax incentives,
  corporate tax, etc.)
• Business Environment (incl. availability of human
  capital, level of education)
• Country Risk Assessment political stability,
  GATS/Trade agreement sector specific binding
  commitments, i.e.
• the GATS/EPA are only additional criterion for
  companies to tick. But they can often make the
  difference. For the Developing countries, it is
  an additional opportunity to seize as to attract
  FDI.

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WHAT THE EUROPEAN SERVICES SECTOR WANTS FROM THE
GATS NEGOTIATIONS, or from any other trade
negotiations (incl. EPA) ?

• Improved market access via Commercial Presence
  Abroad Mode 3 of the GATS i.e. joint ventures
  subsidiaries branching Removal of equity cap to
  allow 100 ownership of FDI
• Commitments for Cross-Border Supply via Mode 1 of
  the GATS, i.e. e-commerce, internet, sending
  electronic data to call centers, back offices,
  etc.
• Movement of Natural Persons via Mode 4 of the
  GATS, i.e. moving skilled business personnel
  within a company (intra-corporate transferees)
  and to a companys clients on a temporary basis

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Hierarchy of European Interestsin Trade
Negotiations

• What EU companies want
• WTO DDA
• Regional Trade Agreements (with Integrated
  Markets)
• Bilateral Agreements
• Autonomous Liberalisation BUT

• gtWhat is happening in the reality
• Autonomous Liberalisation
• FTAs
• RTAs
• RTAs (EPAs) without Services !!!
• WTO ?? !!!

No Legal Security !
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Participation of ACP countries in DDA GATS
negotiations
14 ACP countries have tabled an initial offer Barbados Dominica Gabon Grenada Guyana Fiji, Jamaica Kenya Mauritius St. Chris Nevis St. Lucia St Vincent Grenadine Senegal Trinidad Tobago
4 African Countries 9 Caribbean Countries 1
Pacific Region 1 ESA Region 1 EAC Region 0
SADC (1 S.A.)
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EAC Specific Commitments in the U. R.
Sectors 1 2 3 4 5 6 7 8 9 10 11 Total
Max Poss. 46 26 5 5 5 4 23 4 4 5 35 162
Burundi (LDC LLDC) 9 5 3 2 3 22
Kenya 3 10 3 7 24
Rwanda (LDC LLDC) 2 1 1 1 1 6
Uganda (LDC LLDC) 5(?) 2 7
Tanzania 1 1
LDC Least Developed Country LLDC Landlocked
Developing Country SIDS Small Island
Developing State
1 Business Services 2 Communication Services
3 Construction Related Engineering Services
4 Distribution Services 5 Education Services
6 Environmental Services 7 Financial Services
8 Health Services, etc. 9 Tourism, etc. 10
Recreational Services, etc. 11 Transport
Services 12 Other Services (Kenya 1
commitment)
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ESA (- EAC) Specific Commitments in the U. R.
Sectors 1 2 3 4 5 6 7 8 9 10 11 Total 162
Max Poss. 46 26 5 5 5 4 23 4 4 5 35 Total 162
Comoros Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS Not a WTO Member LDC SIDS
Djibouti (LDC) 8 (?) 1 1 10
Eritrea Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC Not a WTO Member LDC
Ethiopia Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC Not a WTO Member - WTO Observer (Accession) - LDC LLDC
Kenya 3 10 3 7 24
Madagascar (LDC) 2 2
Malawi (LDC LLDC) 5 5 12? 2 4 28
Mauritius 8 8 3 2 21
Seychelles Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer Not a WTO Member - WTO Observer
Sudan Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC Not a WTO Member - WTO Observer - LDC
Zambia (LDC LLDC) 5 5 2 4 16
Zimbabwe 10? 7 3 20
1 Business Services 2 Communication Services
3 Construction Related Engineering Services
4 Distribution Services 5 Education Services
6 Environmental Services 7 Financial Services
8 Health Services, etc. 9 Tourism, etc. 10
Recreational Services, etc. 11 Transport
Services 12 Other Services
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• EPA Negotiations with ESA EAC WHICH ARE THE
  COUNTRIES CONCERNED?
• EU Austria, Belgium, Bulgaria, Czech Republic,
  Cyprus, Denmark, Estonia, Finland, France,
  Germany, Greece, Hungary, Ireland, Italy, Latvia,
  Lithuania, Luxembourg, Malta, Netherlands,
  Poland, Portugal, Romania, Slovenia, Slovakia,
  Spain, Sweden, United Kingdom
• EAC Kenya, Uganda, Tanzania, Burundi, Rwanda
• An interim EAC EPA was initialed by EC and all
  five countries. EAC is a customs union
  operational since 2005 and has the ambition of a
  common market (2009) and later political union.
• ESA initial configuration Burundi, Comoros,
  Djibouti, Eritrea, Ethiopia, Kenya, Malawi,
  Madagascar, Mauritius, Rwanda, Seychelles, Sudan,
  Uganda, Zambia, Zimbabwe
• An Interim ESA EPA was initialed by the EC and
  Comoros, Madagascar, Mauritius, Seychelles,
  Zimbabwe and Zambia.
•   Least developed countries (LDC) underlined,
  Tanzania is not member of ESA, but of SADC

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Interests of European Services Sectors in EPA
with ESA EAC Regions countries

• ESA EAC Regions countries should participate
  more actively to the services negotiations of the
  WTO (To table initial offers opening market
  access to key services sectors for the countries
  and giving national treatment.
• ESA EAC Regions countries should open services
  negotiations with the EU in the EPA framework,
  with the aim to reach a  GATS   agreement, in
  accordance with GATS Article 5 The impact of
  this would be
• Sending a strong signal to foreign investors
  (legal security of investments)
• Contribution to the integration of the region in
  the world economy.
• To increase the cooperation with European
  services companies
• Joint-ventures, subsidiaries, branches, back
  offices, transfers of skills in both ways, etc.

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Interests of European Services Sectors in EPA
with ESA EAC Regions countries

• What countries have agreed to commit in the
  services sectors in the Full EU-CARIFORUM EPA
  initialled in December 2007?

Sectors 1 2 3 4 5 6 7 8 9 10 11 Total
Max Poss. 46 26 5 5 5 4 23 4 4 5 35 162
15 countries 46 26 5 4 5 4 21 3 4 5 35 159
Antigua Barbuda Barbados Belize Dominica
Dominican Republic Grenada Guyana Jamaica
Saint Christopher Nevis Saint Lucia Saint
Vincent the Grenadines Suriname Trinidad
Tobago
NB Total represent commitments by at least one
country, not all Cariforum members have taken the
same commitments many have maintained
limitations, or decided to open with a
transitional period.
more detailed commitments than the CPC
Description
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• What countries have agreed to do in Interim SADC
  EPA initialled in December 2007? (Art 67)
• To liberalise 1 services sector (out of 12) by
  each of the participating countries,
• To agree on a standstill clause for all services
  sectors (as in Art. V.1.b (ii) of GATS)
• To agree to negotiate progressive liberalisation
  with substantive sectoral coverage within a
  period of 3 years following the conclusion of a
  full EPA.
• What are the provisions in EAC ESA Interim EPA?
• The same or even less Is this really going to
  fulfil European service providers ambitions? Is
  this really a big political price to pay by the
  EAC ESA countries? Is this really a difficult
  challenge to achieve?

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• WHAT NEXT for the EU ?
• Bilateral Free Trade Agreements (FTA)? (RTA)?
• EU/GCC (Gulf Cooperation Council) (2008?)
• EU/Mercosur (negotiations since 1999)(?)
• EU/ACP (6 Economic Partnership Agreements 1
  full EPA with Caribbean 12/2007) 5 other Full
  EPAs with services package 2013?
• EU/Mediterranean countries (EuroMed)(2010)?
• EU/Central America 2009?
• EU/Andean Countries 2009?
• EU/South Korea - 2009
• EU/ASEAN
• EU/India - 2010?
• EU/China
• EU/Ukraine

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ESA-EAC REGIONs Services Providers are Welcome
in the EU

• The EUs Services Market is remarkably open
• Worlds largest market for services, valued at
  US7.8 trillion in 2004
• Population of EU 27 493 millions
• GDP per capita of US25,700
• The more the market is open, the more it attracts
  FDI, the more it remains competitive.
• Services providers of the region might find
  opportunities, notably to serve the exporters of
  the region.
• Dont be ashamed or afraid of your small size!

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• The European Union has adopted in December 2006 a
  directive on services in the internal market to
  improve the single market (implementation in
  2010)
• It is automatically extended to all foreign owned
  company incorporated in one of the 27 EU
  countries
• The Directive 2005/36/EC, adopted on 7 September
  2005, consolidates and modernises the rules
  currently regulating the recognition of
  professional qualifications.On 20 October 2007,
  at the end of the transposition period, this
  Directive has replaced fifteen existing
  Directives in the field of the recognition of
  professional qualifications.
• But the directive does not apply to non EU
  Professionals. They must sign either with each of
  the 27 EU Member States, or with the EC, a mutual
  recognition agreement (MRA), according to Article
  VII GATS.
• The EC has mandate to negotiate MRA for
  architects on a pilot phase. Private sectors
  associations agreement is a pre-condition to
  engage in negotiations. The purpose would then
  be to transform this private sector agreement
  into binding agreement. The profession has first
  to agree on the terms of equivalence of the
  diplomas and qualifications ( 6 months study to
  learn local legislation, etc. training period)

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THANK YOU FOR YOUR ATTENTION !
Pascal KERNEIS Managing Director European
Services Forum ESF 168, Avenue de Cortenbergh B
1000 BRUSSELS Tel [phone] Fax 32
2 320 61 68 Email esf_at_esf.be
Website www.esf.be