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Developing countries loose up to 67% of commodity exports earnings to miss-invoicing – UNCTAD

Some commodity dependent developing countries are losing as much as 67 per cent of their exports worth billions of dollars to trade misinvoicing, according to a fresh study by, United Nations Conference on Trade and Development, UNCTAD, which for the first time analyses this issue for specific countries and commodities.

Trade misinvoicing is thought to be one of the largest drivers of illicit financial flows from developing countries. Countries lose valuable foreign exchange earnings, taxes and income that might otherwise be spent on development.

Released during the Global Commodities Forum, the study uses up to two decades’ worth of data covering exports of commodities such as cocoa, copper, gold and oil from Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia.

“This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budgets,” UNCTAD Secretary-General Dr. Mukhisa Kituyi said.

Commodity exports may account for up to 90 per cent of a developing country’s total export earnings, he said, adding that the study generated fresh lines of enquiry to understand the problem of illicit trade flows.

“Importing countries and companies that want to protect their reputations should get ahead of the transparency game and partner with us to further research these issues,” Dr. Kituyi said.
The analysis shows patterns of trade misinvoicing for exports to China, Germany, Hong Kong (China), India, Italy, Japan, the Netherlands, Spain, Switzerland, the United Kingdom of Great Britain and Northern Ireland, the United States of America and others.

The study’s findings include the following:
Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67 per cent of total gold exports. Trade with the leading partners exhibited the highest amounts, as follows: India ($40 billion); Germany ($18.4 billion); Italy ($15.5 billion); the United Kingdom ($13.7 billion).

Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the United States was worth $69.8 billion, or 24.9 per cent of all oil exports to the United States.

Between 1995 and 2014, Zambia recorded $28.9 billion in copper exports to Switzerland, more than half of all its copper exports, yet these exports did not appear in Switzerland’s books.

Between 1990 and 2014, Chile recorded $16.0 billion in copper exports to the Netherlands, but these exports did not appear in the Netherlands’ books.

Between 1995 and 2014, Côte d’Ivoire recorded $17.2 billion in cocoa exports to the Netherlands, of which $5.0 billion (31.3 per cent) did not appear in the Netherlands’ books.
Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth $3 billion.

UNCTAD held the seventh Global Commodities Forum on 15 and 16 July at the Kenyatta International Convention Centre , Nairobi, Kenya, as an integral part of the fourteenth session of the United Nations Conference on Trade and Development – UNCTAD 14.

Under the theme “Breaking the chains of commodity dependence”, participants will discuss how commodity-dependent developing countries can adapt to the twin shocks of lower commodities prices and shrinking demand from emerging economies, in order to realize their national objectives and the 2030 Agenda for Sustainable Development.

Globalization, including a phenomenal expansion of trade, has helped lift millions out of poverty. But not nearly enough people have benefited. And tremendous challenges remain.

How Africa loses out on trade negotiation deals.

Africa has been short changed in the previous negotiations due to lack of identifying key sectors that require urgent attention.“ African Nations come up for instance with a million issues to be addressed at the negotiating table, this wastes time and creates loophole s for developed nations to successfully push forward their agenda.’’ Says senior political and economics advisor at GREEN PEACE AFRICA Fred Njehu.

In an interview with AfricanQuarters in Nairobi, Njehu also noted that lack of political good will, low investment in social services have continued to weaken Africa’s bargaining power.
“ However UNCTAD’s fourteen session will focus more on the issues afflicting least developed and developing countries unlike other bodies..’’

UNCTAD started in 1964 , as the focal point in the United Nations for the integrated treatment of trade and development and interrelated issues in the areas of finance, technology, investment and sustainable development, helps equip developing countries to deal with the potential drawbacks of greater economic integration, through its three pillars of research and analysis, consensus-building and technical cooperation.

With 194 members, UNCTAD mandate is updated every four years when UNCTAD member States meet in a conference to agree on the body’s work programme. The most recent session, UNCTAD 14, takes place this year in Nairobi between 17 and 22 July.

With the tagline “From decision to action”, this year’s Conference has extra importance as the first one since the global community established the Sustainable Development Goals and mandated – via the Addis Ababa Action Agenda – UNCTAD as one of five international entities to mobilize financing for development. The other four organizations are the World Bank, the International Monetary Fund, the World Trade Organization and the United Nations Development Programme.

Official opening of the conference
On Sunday July 17, 2016, the conference was officially opened by Kenya’s president Uhuru Kenyatta who called for strengthening of intra Africa trade.

Uganda’s vice president Edward Kiwanuka in his opening remarks called for competitive global pricing of commodities noting that least Developed countries are still disadvantaged despite series of negotiations.

The UN Secretary General Ban Ki moon urged participants to come up with decisions which will address poverty and unemployment in the world.

Over 5,000 delegates including Heads of State and ministers are attending the conference

 

By Wamoyi  Mercie, AfricanQuarters, Kenya

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