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Monday, March 13, 2023

PAKISTAN

The cost of the shadow economy

Published March 13, 2023

The informal sector’s contribution to Pakistan’s economy is remarkable as it adds a handsome volume of approximately $661 billion, tantamount to 35.6 per cent of GDP. According to the International Labour Organisation, it constitutes 75pc and 68pc of jobs in rural and urban areas; however, it is pregnant with issues like child and bonded labour, gender-based discrimination, and insecurities in the workplace.

Moreover, it embodies small and medium enterprises (SMEs) that are populated by self-employed entrepreneurs, small businesses, informal associations, and street vendors in agriculture and micro-enterprise setups, and thus, they tend to be more resilient to economic downturns. Despite its volume and contribution to the economy, the informal sector creates financial vulnerabilities for formal setups.

Let’s consider the formal market. The Growth Enterprise Market (GEM) board of the Pakistan Stock Exchange (PSX) is a sub-market for SMEs and high-growth companies looking to go public. The GEM board was established following Alternative Investment Market in London, which itself was established in 1995 by the London Stock Exchange as a sub-market to provide a market for SMEs, business startups, and incubates to raise capital and provide a platform for investors to access returns from small businesses.

It has become one of the world’s leading growth markets in the UK for smaller companies, with over 3,000 listed companies from over 70 countries. Though companies listed on the GEM board in Pakistan are subject to less stringent listing criteria and regulations as compared to the ones listed on the main board of the PSX, to the present date, only three SMEs made it to the GEM board, i.e. Pak Agro Packaging Ltd, Supernet Ltd and Universal Network Systems.

Informal setups are backed by special interest groups through a complex mix of tax laws and regulatory compliances for the formal sector

This anomaly has a handful of reasons, like investor participation seems minuscule as only 0.3 million accounts are registered with the National Clearing Company of Pakistan Limited out of around 57.5m bank accounts. This indicates less than 0.5pc of investor participation at the PSX forum.

Investor participation, driven by incentivisation and a less stringent regulatory burden to the informal sector, is visible in real estate property pricing bubbles, higher forex trading returns, and inflationary pressure. These avenues produce ample easy money with the least risk and low regularity compliances under state patronage.

The Imran Khan-led government launched a construction amnesty scheme to promote housing to generate jobs and fill the gap of millions of housing unit shortages. According to Zameen.com, since 2018, the average per square feet price has increased from Rs3,300 to 7,000, which is 26pc returns per annum in open plots investment in Islamabad.

It not only doubled the real estate prices in other cities such as Karachi, Lahore, Peshawar and Faisalabad but also shifted the investment chunk toward the real estate sector. Many industrialists shifted their attention to the real estate sector.

Similarly, the gold price in December 2017 was Rs56,200 per tola, but now it is Rs201,000 per tola, which is more than 50pc return per annum in gold investment. Likewise, on 14 Jan 2018, the exchange rate of rupees to the dollar was Rs110 to a dollar, and now it is Rs278 — an average of 30-35pc returns per annum.

On the flip side, KSE-100 Index provided compounded annual returns of 14.55pc, and industrial profit was recorded at less than 15pc per annum. The inflation rate in 2018 was 5.08pc, and now it is above 30pc. If the inflation-adjusted returns per annum are calculated, it can be said that the real return an investor receives in the formal market and industrial setup is negative.

Pakistan already has one of the highest income tax rates in the world as far as corporations are concerned, which further depicts a decrease in the wealth of formal sector investors. Consequently, since 2013, more than 200 companies have been delisted from PSX. Only 526 companies are listed on the main board, and just three SMEs are listed on the GEM board; however, the total number of registered companies with the Securities and Exchange Commission of Pakistan now stands at 176,000.

The prominent explanation for delisting is a cost-benefit trade-off. If a listed firm’s marginal benefit/cost ratio is less than shedding avoidable costs, this may lead to de-capitalisation.

Nevertheless, investor participation is more in informal sectors in which most of the businesses are unregistered. The Asian Development Bank (ADB) confirms that more than 90pc of the SMEs that operate in the informal sector are set up with the help of family members and friends.

These businesses generally operate in agri-business, food chain, agri-machinery, and textile sectors. Some of these raise money for seasonal products and services and wind up their business when the season ends. These setups are more visible during harvest in rural areas and in food chain industries in urban areas. They earn money by stocking up on necessities like sugar, flour, wheat, grains, oils etc.

They employ the staff on a seasonal or contractual basis and then lay them off. Furthermore, fewer salaries are paid to them compared to minimum wages in cash form without any social security i.e. health insurance and accommodation. Consequently, social and financial vulnerabilities for unemployed youth are increasing drastically, resulting in modern slavery.

Informalisation is proliferated to avoid income tax, intense documentation and regulation, which further fuels decapitalisation and insecurities in the labour market. These informal setups are backed by special interest groups of local politicians, families of bureaucrats, and land elites through a complex mix of tax laws and regulatory compliances for the formal sector.

The writer is an Assistant Professor (PhD Financial Economics) at the National University of Modern Languages, Islamabad. He can be reached at (abwahid.fms@gmail.com)

Published in Dawn, The Business and Finance Weekly, March 13th, 2023

Tuesday, August 10, 2021

WHY FARMERS CREATED THE CANADIAN WHEAT BOARD
Drought-battered producers facing another crisis — contract penalties

Deadly combo of crop failures and sky-high prices leave some facing huge penalties on unfulfilled contracts

By Alexis Kienlen
Reporter
Published: August 9, 2021

Although this harvest will be meagre, Jason Saunders expects to fulfil his grain contracts this year. But countless farmers across the Prairies won’t be able to — and many face substantial penalties when they can least afford it. Photo: Supplied

The drought is squeezing producers from all sides, with many facing another calamity — not having enough crop to fulfil their grain contracts.

“There are issues because the drought is so widespread,” said Jason Saunders, vice-chair of Alberta Wheat and a dryland farmer from near Taber. “There was aggressive forward contracting on canola and old-crop wheat because of the record-high prices happening in the spring.

In normal times, there’s the option of sourcing canola or grain from farmers who have a good crop. Moreover, prices tend to fall between the time a portion of the crop was pre-sold and harvest.

But that’s not the case this year.

“This year is different, because more areas have been hit by drought. Finding the production needed won’t be easy — it’s a Prairie-wide issue,” said Saunders.

Not being able to fulfil contracts — and having to take a big loss — are a huge concern this year as prices, especially for canola, are sky high and producers were more likely to forward contract, said Alberta Canola general manager Ward Toma.

“We’ve had two very rare events happening at the same time,” he said. “Historical, high, never-heard-before prices at the same time we’re having a historic low production that is shrinking every day.

“We see crop disappearing every day because of the dry condition in the Prairies, and we see record prices at the same time.”

But there’s little that his organization, or others, can do once a contract has been signed, said Toma.

“It’s a voluntary contract between you and the grain company,” he said. “You accepted it, and that’s part of the problem. With contract law, you sign that document and you (have to) abide by those terms.”

Kevin Auch took a “very conservative” approach when pre-selling part of his pea crop. But he’s not sure he’ll even harvest the 13 bushels an acre he needs to fulfil that contract. photo: Supplied

However, many producers “just look at the price” or assume that if they have a complete wreck, there’s some sort of way out.

“Unfortunately, we have people learning these things the hard way,” he said. “They don’t take the time to read the contract and understand what the terms are. They just look at the price.”
Be up front

But there are other reasons why farmers sign grain contracts.

“The idea is that you pre-sell some of your crop, so you get harvest movement or soon thereafter,” said Sylvan Lake producer Mike Ammeter. “It’s a cash flow issue — I need the money, I need this grain sold and to get it moved — (or) maybe it’s a storage issue.”

Pre-selling is not uncommon but “it’s all over the map as to how farmers approach that,” he added.

Some are more aggressive but even those who take a conservative approach can be caught in a year like this one, said Ammeter.

“Maybe it’s your habit to pre-sell 20 to 30 per cent of your crop, and now you’ve got nothing. How do you tackle that?”

The first thing to do is to call the grain company, he said.

“You have to do your best to negotiate out of it. Be up front and do your best to come to an agreement on how you’re going to settle this.”

That’s the advice that farm organizations across the Prairies are giving their members right now. But again, this year is different. For example, in past years some companies might have agreed to roll the contract over to next year. But this year, grain companies are in a bind, too, noted Toma.

“The shortage of the crop is going to be a problem — not just for the farmers who can’t deliver the product, but also to the grain companies that can’t make their deliveries,” he said.

It all makes for a very tough situation.

“I don’t see the grain companies would allow you to purchase back your grain (contract) until you harvest and you deliver everything you’ve got,” said Saunders. “And then if you’re still short, it would be a case where (you) would buy it at market price.”

Nevertheless, contact your grain company immediately, he said.

“Grain companies that get a phone call from producers saying they are short — they have to send their representatives out to look at the field. They don’t take your word for it, unless there has been a widespread hailstorm.”

Also, during droughts people often think they have less crop than they do, said Saunders, who is pretty sure he will be able to fill his contracts.

“We’re harvesting our winter wheat right now,” he said in an interview in late July. “It’s not very good, but there’s still something. At times, people are just saying there’s zero. They can be short, and not be at zero.”
One-sided deals?

But the situation is once again shining a light on the nature of these contracts, which Saunders calls one sided.

“They (grain companies) have out clauses, but there aren’t any out clauses for producers,” he said. “I think an equal contract is all I could ever argue for at this point — one that has equal risk and liability on both sides.”

Although smaller companies handling special crops might let a producer out of a contract, Saunders said he has never seen a large grain company or a primary elevator do that.

Even though he only pre-sold a small portion of his pea crop, Carmangay producer Kevin Auch doesn’t know if he’ll harvest enough for his contract.

“A 13-bushel-acre average is what I’ve contracted, but this is the worst crop I’ve seen since the 1980s,” he said. “I thought I was being very conservative, but I might be short on my contract a little. It’s going to be nip and tuck here.”

Some farmers may find themselves first delivering whatever they harvested to the elevator and writing a cheque to a grain company, he said.

“Some of them say, ‘You’ll make up the difference between the price that you contracted it for, and the price that it is now — that could be $2, $3, $4 a bushel depending on what it is,” said Auch. “It gets a little scary when you’re having to take $2, $3, $4 a bushel out of the meagre crop that you have and apply it to the crop you’re short on.”

Producers should pull out their contracts and give them a thorough read, he said.

“Some contracts have Act of God clauses, so if you have that, you’re fine. It just depends on what the contract says.”

However, Act of God clauses are more common in pulses and specialty crops, and are not commonly seen in wheat and canola, he said, adding a grain company “can’t take that loss either.”

“They make their money by shipping the grain,” said Auch. “They have a margin in there, and that’s the margin that they pay to get it to the customer. Now the customer is still expecting that product at that price.”

While some have argued crop commissions in the Prairie provinces, should band together to pressure grain companies to make contracts more fair to farmers, their role is very limited in this regard, he said

“The only thing commissions could do is inform farmers of what they are signing … (and) warning farmers of some of the pitfalls,” said Auch, who served as Alberta Wheat chair in 2016-18.

The advice to call your grain company as soon as possible really is the best option, he added.

“I’ve already talked to one of my grain buyers that I am going to be short on my pea crop,” he said. “They are aware of that, and if they have anything on their end that they can start working on, they can mitigate it.”

You should also talk to the grain company about any fees, said Daryl Fransoo, chair of the Western Canadian Wheat Growers Association.

Often, producers aren’t aware of the fees and that they can vary widely, said the Saskatchewan farmer who has been taking a lot of calls from growers worried about their contracts.

“Farmers are getting charged over and above the spread when they’re buying their contract out,” said Fransoo. “Grain companies are calling it an administration fee. It differs greatly between companies.”

ABOUT THE AUTHOR
Alexis Kienlen lives in Edmonton and has been writing for Alberta Farmer since 2008. Originally from Saskatoon, Alexis is also the author of two collections of poetry, a biography, and a novel called "Mad Cow."

Wednesday, March 23, 2022

The Russian War In Ukraine And Its Impact On Africa – Analysis

March 18, 2022

By Dr. Mohamed Chtatou

When Vladimir Putin, the president of Russia, started sending thousands of soldiers and tanks to the border of Ukraine, many thought he just wanted to make a show of force. The two countries are very similar and were once very close. But this was no joke, in the least, Putin meant business. His hidden agenda is to absorb peaceful Ukraine into the Russian Federation on the ground that it is an act of self-defense in reaction to the West’s territorial encroachment that aims at surrounding Russia to weaken it.

Russian violation of national sovereignty and territorial integrity of a peaceful Ukraine

However, on February 24, 2022, the Russian army started to enter and bomb Ukraine. In truth, we have to go back in time a bit: things have been going badly between the two countries for at least eight years. In 2014, people in Kyiv, the capital, began to demand more freedom and closer ties with the European Union and the West. The Ukrainian president at the time, who was a friend of Russia, was even forced to flee.

Shortly thereafter, in response, Russia had already invaded a part of Ukraine, Crimea, which it considered its own. In another part of the east of the country, the Donbas, a first war broke out between those who wanted to move closer to Russia and those who feared that Ukraine would be cut into pieces. For eight years, several countries (including Switzerland) tried to bring peace between the Ukrainian brothers. But they did not succeed.

Vladimir Putin now explains that he wants to defend the Ukrainians who feel more Russian. According to him, they were “threatened” and they needed his help. However, he has also given a whole series of other justifications that blur his real objectives. For example, it seems that the Russian president does not really recognize Ukraine’s right to be an independent country from Russia. He also believes that if Ukraine moves closer to Western Europe, and especially if it becomes part of the military alliance that includes these countries as well as the United States and Canada (NATO), Russia will find itself surrounded by enemies.

In the past, Russia was a vast empire that extended far beyond its current borders. From his statements, Vladimir Putin seems to consider that he must forever maintain special ties with the other countries that made up this empire. But the vast majority of Ukrainians do not share this opinion at all, and they are ready today to defend their country.

The intensity and scale of the invasion of Ukraine by the Russian army is causing a humanitarian catastrophe of a severity not seen in Europe since the Second World War. This attack is led by one of the most powerful armies in the world against a country of 44 million inhabitants before the invasion. As proof of the violence of the fighting, over 3 million Ukrainians have already fled to neighboring countries, mainly to Poland.

Refugees are crossing to neighboring countries to the west, such as Poland, Romania, Slovakia, Hungary, Moldova, Belarus, and even Russia.

The UN says that as of March 14, 2022:

Poland had taken in 1,808,436 refugees
Hungary 263,888
Slovakia 213,000
Moldova 337,215
Romania 453,432
Russia 142,994
Belarus 1,475

The speed of this exodus is unprecedented. There are already more Ukrainian refugees in European countries than the number of Syrians who fled the war in their country in 2015. At the time, there was talk of a refugee “crisis.” Europe, with the exception of Germany, had closed its borders. Today, the attitude towards the Ukrainians is quite different. But how long will the countries bordering Ukraine be able to cope with this influx?

Ukrainians trapped in bombed-out cities

The situation is even more dramatic inside Ukraine. After failing to quickly take the capital, Kyiv, to replace the Ukrainian government, the Russian army has stepped up its bombing in an attempt to break the Ukrainians’ resistance. The strikes on densely populated cities are causing many casualties among the inhabitants.

According to the UN, hundreds of civilians have been killed since the beginning of the invasion on February 24,2022. But these are only the deaths that could be confirmed. The human toll is likely to be much higher. And the death and injury toll will continue to rise as long as the war continues.

As of Sunday, March 13, 2022, at least 636 civilians have died in Ukraine since the Russian invasion began, the UN Human Rights office (OHCHR) said Monday in a statement.

According to the agency, at least 1,125 civilians have been injured so far:

“Most of the civilian casualties recorded were caused by the use of explosive weapons with a wide impact area, including shelling from heavy artillery and multi-launch rocket systems, and missile and air strikes,”

the agency said.

“OHCHR believes that the actual figures are considerably higher, especially in Government-controlled territory and especially in recent days, as the receipt of information from some locations where intense hostilities have been going on has been delayed and many reports are still pending corroboration,”

it added.

Besides, hundreds of thousands of Ukrainians are trapped in bombed-out cities. Some of them are surrounded by the Russian army. In the besieged cities, the population is finding it increasingly difficult to find drinking water or food. Negotiations between Ukraine and Russia continue, despite the fighting, to evacuate the population of several cities. But, for this, ceasefires are needed so that the inhabitants can be evacuated.

This is the first time that war has occurred in a country with so many nuclear reactors. Moreover, the worst accident in the history of civil nuclear power occurred in Ukraine in 1986, when a reactor exploded in Chernobyl and caused the death of many people. Today, nearly 2600 km² remain off-limits around the site because of radioactivity. However, this area has been invaded by the Russian army, as well as the nuclear power plant of Zaporijjia (six reactors), in the south of Ukraine.

Africa cannot remain indifferent to the Russian aggression

As the war in Ukraine continues, the African Union has clarified its position by condemning the Russian invasion. In such political crises, Africa has often refrained from revealing its position, a move often interpreted as the reason for its inaudible position on the international scene.

But this time, the continent could hardly remain indifferent to the Russian invasion, especially since Moscow also has close relations with several African countries.

The current chairman of the African Union (AU), Macky Sall, and the chairman of the AU Commission, Moussa Faki Mahamat, expressed their extreme concern about the very serious and dangerous situation created in Ukraine.

In their statement, they called on the Russian Federation and any other regional or international actor to imperatively respect international law, territorial integrity, and national sovereignty of Ukraine.

The current Chairman of the African Union and the Chairman of the African Union Commission urged both parties to the immediate establishment of a ceasefire and the opening without delay of political negotiations under the auspices of the United Nations, in order to save the world from the consequences of a global conflict, for peace and stability in international relations for the benefit of all peoples of the world.

On another level, African countries are concerned about the fate of their nationals who try to leave the country. They also remember the aid that used to come from Russia and Ukraine.

The current Chairman of the African Union and President of the Republic of Senegal, H.E. Macky Sall, and the Chairperson of the African Union Commission, Moussa Faki Mahamat, are following closely the developments in Ukraine and are particularly concerned about reports that African citizens on the Ukrainian side of the border are being denied the right to cross the border to safety.

Both Presidents reiterate that all persons have the right to cross international borders during conflict and, as such, should have the same rights to cross the border to safety from the conflict in Ukraine, regardless of their nationality or racial identity.

Reports that Africans are subject to unacceptable differential treatment are offensive and racist and violate international law. In this regard, the Presidents urge all countries to respect international law and to show equal empathy and support to all people fleeing war, regardless of their racial identity.

The Chairpersons commend the extraordinary mobilization of the AU Member States and their Embassies in neighboring countries to receive and guide African citizens and their families who are trying to cross the border of Ukraine to safety.

African states’ reaction to the war in Ukraine

Africa represents more than 25% of the seats in the UN General Assembly. In a vote on a resolution condemning Russian military aggression, only Eritrea voted against the resolution, while 28 African countries condemned the Russian action. But 17 African countries abstained and 8 other countries did not take part in the vote. How to explain the different positions within the African continent?

We should rather speak of “the” Africas, insofar as Africa is not a monolithic block and the contingency of international relations means that many reactions are due to national issues. Kenya’s reaction at the UN Security Council is enlightening in this respect: the Kenyan representative calmly recalled that the African continent had been colonized by the great European powers and that the populations had been separated by the borders drawn, but that this did not mean that there were incessant wars because the African states had learned to live with this division. This is a good lesson for Russia. It should be noted that the representative recalled from the outset the sacrosanct principle of the intangibility of borders, a principle affirmed by the Organization of African Unity (OAU) in 1963.

This explains the cautious reactions: the African Union does not condemn, but calls for respect of international law and the sovereignty of Ukraine. This does not mean that African states support Russia: on the contrary, none, not even Mali or the Democratic Republic of Congo where Russia is present with the Wagner company, have given their support to the invasion. What might appear to be diplomatic prudence is not so insignificant when a nuclear power flouts international law.

However, this prudence can be explained by two main factors:

The risks of separatism faced by certain African states, and;
Their dependence on Russia, particularly in terms of grain. Tunisia and Egypt import wheat, notably from Russia and Ukraine.

We can see that the current situation is also summed up by the power games between the West and Russia. There is no distinction made between NATO and the West. It is interesting to follow the distinction that could be made between the cautious diplomatic positioning of the diplomats and the more assertive and clearly pro-Russian public opinions. They have nothing to do with a form of the third way. On the contrary, they share with Russia a rejection of Western values and denounce a form of Western hypocrisy, which condemns the invasion of Ukraine but has not hesitated to intervene in Syria, Libya, or Afghanistan. The double standard is denounced. From the Afro Barometers, we see that the share of positive popular perceptions of Russia and China has increased significantly over the past five years. This reflects Russia’s economic, political and military commitment, but also the role of its propaganda media.

There is also some African ambiguity about Russia, with the public seeing Putin as a strongman who would therefore have the right to decide on a country’s future security alliances while being very concerned about their sovereignty. It seems to him that there is a great deal of Russian political mythology, disseminated and maintained by Putin, that is shared by African populations: moral equivalence between Russian and NATO interventions, strong anti-imperialism, anti-Americanism, the politics of humiliation, the feeling that history is written by the victors. All this will be interesting to follow.

The international order, a few years ago, was still unipolar. We are now moving towards a bipolarization. It is an unstable, interdependent system. However, it is not in the interest of any state to declare itself at odds with international law, especially small states, for whom international institutions are power relays.

Grains at the center of geopolitics

Wheat and other grains are once again at the center of geopolitics after Russia’s invasion of Ukraine. With both countries playing a major role in the global agricultural market, African leaders need to pay attention.

Agricultural trade between the continent’s countries and Russia and Ukraine is significant. African countries imported $4 billion worth of agricultural products from Russia in 2020. About 90% of these products were wheat, and 6% were sunflower oil. The main importing countries were Egypt, which accounted for almost half of the imports, followed by Sudan, Nigeria, Tanzania, Algeria, Kenya, and South Africa.

Similarly, Ukraine exported $2.9 billion worth of agricultural products to the African continent in 2020. About 48% of these products were wheat, 31% corn, and the rest was sunflower oil, barley, and soybeans.

Russia and Ukraine are major players in the global commodity market. Russia supplies about 10% of the world’s wheat, while Ukraine produces 4%. Collectively, this represents almost the entire wheat production of the European Union. This grain is intended for domestic consumption and export markets. Together, these two countries account for a quarter of global wheat exports; in 2020, they amounted to 18% for Russia and 8% for Ukraine.

These two countries are also key players in the corn sector, with a combined production of 4%. However, when it comes to exports, Ukraine and Russia’s contribution is much larger, with 14% of global corn exports in 2020. They are also among the leading producers and exporters of sunflower oil. In 2020, Ukraine’s sunflower oil exports accounted for 40% of global exports, compared to 18% for Russia.

Russia’s military action has caused panic among some analysts, who fear that the intensification of the conflict could disrupt trade, with serious implications for global food stability.

I share these concerns, particularly with regard to the consequences of a spike in global grain and oilseed prices. These are among the driving forces behind the rise in global food prices since 2020. This is mainly due to droughts in South America and Indonesia, which have led to crop failures, and increased demand in China and India.

The disruption of trade, due to the invasion, in this important Black Sea grain-producing region would contribute to higher international agricultural commodity prices, with potential negative impacts on global food prices. An increase in commodity prices was visible only days after the conflict began.

This is a concern for the African continent, which is a net importer of wheat and sunflower oil. In addition, there are concerns about drought in some parts of the continent. The disruption of shipments of essential commodities would only add to the general concern about food price inflation in a region that imports wheat.

War in Ukraine: what consequences for the African economy?

The war in Ukraine has, undoubtedly, terrible consequences on the African economy: an increase in the price of gas, oil, agricultural raw materials. The invasion of Ukraine by Russia risks destabilizing the African economy still in remission of the COVID 19 pandemic.

In an interconnected world, any conflict can have repercussions beyond the battlefield. Africa will not be spared the economic and political consequences of Russia’s invasion of Ukraine, observes the continent’s press.

The lasting relationship that Russia has built with Africa will be put to the test by the current crisis in Ukraine, analysts tell the Pan-African website Africanews.

Thus, on the Pan-African level, through the voice of its current chairman Macky Sall, the African Union (AU) was quick to express extreme concern about the very serious and dangerous situation created in Ukraine, while calling on Russia to imperative respect for international law, territorial integrity and national sovereignty of Ukraine.

Officially, South Africa is on the side of peace. In a letter to the nation published Monday, March 7, 2022, President Cyril Ramaphosa called for a resolution of the conflict between Russia and Ukraine through dialogue. This position is in keeping with the restraint that characterizes South African diplomatic practices, even if the Russian influence within the ruling African National Congress (ANC) raises questions.

On the first day of the Russian invasion, February 24, 2022, South Africa surprised everyone by calling on Russia, through its Department of International Relations (the Ministry of Foreign Affairs), to immediately withdraw its forces from Ukraine. The stance came as a surprise, since South Africa, which is also a member of the BRICS group (along with Brazil, Russia, India, and China) and is close to Moscow, is usually more measured in its diplomacy. It was quickly followed by unease within the executive.

Another reaction came from Morocco, which indicated through its Foreign Ministry that it was following with concern the evolution of the situation between the Russian Federation and Ukraine, reports the Moroccan website Le 360.

As for Algeria, a historical ally of Russia, it simply called on its citizens in Ukraine to respect the security instructions, reports Dzair Daily.

In the African press, the most glaring concern is about grain imports from Ukraine and Russia and the fear of disruptions in supply and prices, says Africanews. The Continent has the same analysis, recalling the importance of Russian wheat.

The Tunisian Central Bank decided to maintain its key rate at 6.25%, during a meeting of its board of directors held on Monday, March 14, 2022. The announcement comes in a context marked by global inflation which has affected commodity prices. Internationally, the Tunisian Central Bank is following with great attention the fallout from the Russian-Ukrainian war on global business, on supply chains, and on the international prices of raw materials and basic foodstuffs, which are likely to have a strong impact on inflation, the institution said.

UN Secretary-General Antonio Guterres warned on Monday, March 14 2022 that the repercussions of Russia’s war in Ukraine could result in a hurricane of famine in many countries. Highly dependent on imports of wheat and other essential foodstuffs, most countries around the Mediterranean and the rest of the continent are preparing to suffer a major shock.

The outlook for African countries is bleak in the wake of the war in Ukraine. The cessation of exports of cereals, including wheat, and other agricultural inputs, will hit most of them hard, as they are already facing a structural food crisis (climatic disturbances, conflicts) or have been considerably weakened by price increases and stock market speculation on essential products.

Moscow and Kyiv account for 34% of trade in wheat, a commodity that has increased by 70% since the beginning of the year. The countries around the Mediterranean are suffering greatly. For Egypt, this represents 80% of imports. It is the largest importer of wheat in the world (12 million tons). The country has three or four months of stock, estimates Jean-François Loiseau, president of the French cereal interprofession Intercéréales. The price of bread has jumped by 50% since the beginning of the Russian invasion of Ukraine. Cairo is considering an increase in the price of the subsidized wafer intended for low-income earners. A risk not taken since the bread riots of 1977.

This is a source of concern for other countries in the region, such as those in the Sahel and West Africa, historically net importers of food. Algerians, for example, remember the riots of 2011 following a sudden surge in oil and sugar prices that spilled over into other consumer goods. In some areas of Algiers, stores were stormed by groups of young people. Demonstrations broke out 250 km away in the city of Béjaïa, in Kabylia, and as far away as Constantine, the capital of the east of the country. However, Algiers is hoping to cushion this shock with additional earnings from gas exports, just like Morocco for phosphates, whose price is rising.

On the other hand, the food insecurity from which the poor populations in Lebanon, Yemen, Syria and Sudan, torn by internal conflicts, are already suffering, is going to increase. According to the UN Food and Agriculture Organization (FAO), world food prices reached a record high in February, up 3.9% from January.

Europe and Africa will be very deeply destabilized in terms of food in the next 12 to 18 months, warned Emmanuel Macron on Friday, March 11, 2022, at the end of a European summit in Versailles (Informal meeting of heads of state or government, Versailles, 10-11 March 2022.) Beyond this observation, African countries need a real safeguard plan to avoid the explosion of famine feared by the World Food Program (WFP).

Dr. Mohamed Chtatou

Dr. Mohamed Chtatou is a Professor of education science at the university in Rabat. He is currently a political analyst with Moroccan, Gulf, French, Italian and British media on politics and culture in the Middle East, Islam and Islamism as well as terrorism. He is, also, a specialist on political Islam in the MENA region with interest in the roots of terrorism and religious extremism.

Saturday, July 23, 2022

Transport Canada Invests in Saskatchewan

Written by David C. Lester, Managing Editor, Railway Track & Structures

July 18, 2022

Canadian Pacific photo

Canada’s supply chain is still feeling the impacts of the pandemic, and the Government of Canada says it “is committed to addressing this by strengthening Canada’s supply chains and trade corridors, which will grow the economy and mitigate global inflation.”

Minister of Transport Omar Alghabra announced C$18.3 million in funding for four new projects under the National Trade Corridors Fund, “which will help to improve the efficiency of rail networks in Regina and southern Saskatchewan”:

C$1 million to develop a preliminary design to relocate railroad crossings in Regina, Saskatchewan (above). The City of Regina is contributing the remaining amount for a total investment of C$2.4 million.
C$13.5 million for a railway grade stabilization project, where extensive railway work will be undertaken on the Canadian Pacific interchange near Eston, Saskatchewan. Last Mountain Railway will contribute an equal amount for a total investment of C$27 million.
C$1.6 million for a new pre-interchange yard on the Canadian Pacific interchange near the town of Assiniboia, Saskatchewan, which will increase operating interchange capacity, allowing increased traffic flow and improved fluidity. Great Western Railway will contribute an equal amount for a total investment of C$3.2 million.
C$2.2 million to build 12,000 feet of additional track to address congestion issues at the interchange between the Stewart Southern Railway (former CP Tyvan Subdivision) and Canadian Pacific in Lajord, Saskatchewan (below). Purely Canada Foods will contribute the remaining funding toward the project for a total investment of more than C$6.5 million.

“Through the National Trade Corridors Fund, the Government of Canada is investing in well-functioning trade corridors to help Canadians compete in key global markets, trade more efficiently with international partners, and keep Canadian supply chains competitive,” Alghabra said. “This is part of the Government of Canada’s long-term commitment to work with stakeholders on strategic infrastructure projects to address transportation bottlenecks, vulnerabilities, and congestion along Canada’s trade corridors.

“An efficient and reliable transportation network is key to Canada’s economic growth. The Government of Canada, through the National Trade Corridors Fund, is making investments that will support the flow of goods across Canada’s supply chains. The National Trade Corridors Fund is a competitive, merit-based program designed to help infrastructure owners and users invest in the critical transportation assets that support economic activity in Canada. Under this program, a total of C$4.6 billion over 11 years (2017-2028) has been announced. Budget 2022 provided C$450 million over five years, starting in 2022-23, to support supply chain projects through the National Trade Corridors Fund, which will help ease the movement of goods across Canada’s transportation networks.”

Transport Canada administers the National Trade Corridors Fund, “which supports improvements to Canada’s roads, rail, air, and marine shipping routes to foster domestic and international trade.” Provincial, territorial, and municipal governments, Indigenous groups, not-for-profit and for-profit private-sector organizations, some federal Crown corporations, and academia are all eligible for funding under the National Trade Corridors Fund.

Editor-in-Chief William C. Vantuono contributed to this story.

CP, KCS to STB: CPKC ‘Compellingly in the Public Interest, Should Be Approved Without Conditions’

Written by William C. Vantuono, Editor-in-Chief July 14, 2022

KCS and CP locomotives at the top of the westbound grade at the Continental Divide in Crowsnest Pass, Alberta. Photo by David Duffin

The document exceeds 4,300 pages: Canadian Pacific’s and Kansas City Southern’s Surface Transportation Board filing on their merger: “Applicants’ Response to Comments and Requests for Conditions, Opposition to Responsive Applications, and Rebuttal in Support of the Application.”

The entire filing can be accessed from the STB website. The Filing ID is 304973. Here’s a summary of the points that CP and KCS make in response to the numerous comments and condition requests various parties have thus far filed with the STB:

“As we demonstrate in the Application and the evidence and argument submitted herewith, the Application is compellingly in the public interest and should be approved without conditions beyond those embodying the commitments Applicants are making … to ensure that the public interest benefits of the combination of CP and KCS come to pass,” the merger partners say in their introduction. “The transaction is supported by hundreds of shippers, short lines, passenger rail interests, labor organizations, and others. No shipper or shipper association requests that the transaction be denied. The Federal Railroad Administration endorses Applicants’ Safety Implementation Plan. Amtrak and other passenger rail interests support the transaction. Amtrak stresses ‘CP’s excellent record as an Amtrak host railroad and CP’s commitments to Amtrak’s efforts with states and others as detailed in the agreement’ reached between Amtrak and CP, and believes that the CP/KCS transaction ‘promises significant public benefits for the U.S. rail network.’ What opposition there is comes principally from the five Class I railroads. The protection these Class I railroads seek is itself evidence that they see the CP/KCS transaction an injecting new competition into the North American rail network.”

Point By Point

• “The transaction will result in significant public benefits. There is no merit to claims by Class I rivals that CPKC will not provide valuable new competitive options. The Class I critique of CPKC traffic estimates misses the fundamental point that the stronger competition that comes with the transaction is what really matters. [Our] estimates of the traffic CPKC will attract are reasonable and sound [and] are validated by the transaction’s Extensive shipper support and real-world developments. The KCS Board’s highly conservative pre-agreement synergies Estimates do not Undermine applicants’ anticipated benefits. There is zero risk to CPKC’s financial viability and continued investment, regardless of how much new traffic is attracted to the CPKC system, or at what rates. The Class I critique of the operating efficiencies generated by the transaction is invalid. CN’s continuing criticisms of the operating plan lack merit and are irrelevant to the Board’s evaluation of the transaction’s impacts.

• “There is no basis for concern about ‘vertical’ competition. The Board has extensive experience with end-to-end mergers and the net benefits they have brought. Commenters offer no new economic or other learning that calls into question the Board’s consistent precedents and factual conclusions. KCS has not used its control of Tex Mex and KCSM to foreclose UP or BNSF routings through the Laredo Gateway, and neither will CPKC. The same forces that ensured there was not foreclosure following KCS/Tex Mex and other cases will apply here. [Our] commitments—enforced as appropriate by shippers—are the tried-and-true way to address concerns about vertical foreclosure. The rate-setting mechanism proposed by UP and BNSF is both unnecessary and would be affirmatively anticompetitive. Shipper group desires for “open access” and other reregulatory remedies are not merger-related. Certain requests relating to “gateways” and “bottlenecks” represent an improper effort to revisit the Board’s bottleneck rate rules. Requests for “reciprocal switching access” are similarly unrelated to this transaction

• “The transaction will not lead to service disruption. Additional service-related conditions would unduly burden CPKC’s competition for no valid purpose.

• “Basic features of the transaction will prevent CPKC traffic growth from overwhelming rail capacity. The transaction will not cause disruption on the Lines KCS shares with UP and BNSF in Texas. UP and BNSF proceed from the false premise that CPKC Needs their permission to Use shared trackage to compete against them. The facts show that CPKC’s potential new trains will not exceed capacity on UP/BNSF trackage rights segments in Texas. There will be no capacity shortfall in the Houston Terminal complex. There is adequate capacity on the UP-owned Lines between Houston and Beaumont. Concerns about the Neches River Bridge at Beaumont are unwarranted. There is adequate capacity on the UP-owned Lines between Victoria and Robstown. UP and BNSF demands that CPKC fund 100% of any new infrastructure is overreaching and inappropriate. There will be adequate capacity for the traffic that CPKC hopes to attract elsewhere on its network.

• “The transaction will not adversely Impact Metra’s commuter services and will not meaningfully increase freight traffic on lines shared with Metra. Metra further misunderstands the transaction’s impacts because its expert’s RTC model is fundamentally flawed. The MD-W Line west of Bensenville Yard has ample capacity to accommodate eight additional daily freight trains. Developments independent of the transaction will further improve the performance of Metra’s trains on lines shared with CP, which values its partnership with Metra and regrets that Metra’s comments have mischaracterized Metra’s solid performance on lines shared with CP. Metra has consistently performed well on CP’s lines. CP leadership is committed to supporting Metra’s operations, consistent with its contractual obligations. None of Metra’s complaints about CP are related to the transaction; most of Metra’s pre-transaction dispatching concerns relate to operations that will be unaffected by the transaction. Dispatching Metra trains on the ‘wrong track’ is a pre-transaction concern without merit. Pre-transaction issues having no bearing on this proceeding. Metra’s complaints about PTC implementation issues are irrelevant and unfair. [We] are committed to reassure Metra and its ridership that the transaction will not impact Metra’s passenger service. Metra’s requests to force a shift of dispatching to Metra would override CP’s contractual rights and undermine rather than improve the handling of Metra trains. Metra has long sought control of dispatching on the MD-W and MD-N Lines; the Board’s precedents sharply disfavor forced shifts in dispatching. Transferring dispatching control to Metra would create more issues than it resolves. Metra’s request to alter the compensation terms of the CP/Metra agreement are overreaching. Demands for hundreds of millions in new infrastructure are either wildly overreaching or already in progress. Metra’s request for a binding standard and process for schedule changes and new trains improperly seeks to improve its contractual rights. Metra’s requested oversight conditions are inappropriate and unnecessary .

• “The Board should Reject CN’s proposed ‘inconsistent’ purchase of CPKC’s Springfield/East St. Louis Line. CN’s gambit is yet another round in CN’s effort to disrupt or delay the CP/KCS transaction. There is no competitive harm to address. Any divestiture of the Springfield/East St. Louis Line would harm the public interest, not enhance it. If CN is right about the ‘truck diversion’ potential of joint investments in the Springfield Line, a divestiture would not be necessary to achieve it. Were the Board to conclude that a remedy is required, it should not order a sale of the line, much less specify CN as the buyer.

• “Norfolk Southern’s requested relief is based on a misreading of the operating plan and would inappropriately alter pre-existing contractual rights to NS’s commercial advantage. CPKC will be highly motivated to continue to reap the rewards of the successful Meridian Speedway LLC joint venture. The facts contradict NS’s concerns about service impacts. The Wylie Intermodal Terminal has ample capacity to support [our] projected traffic increases. NS’s proposed contingent trackage rights make no sense as a ‘remedy’ for potential service concerns. NS’s request for contingent trackage rights would improperly convey to NS commercial rights that NS did not negotiate or pay for in 2006.

• “The Board should reject the relief requested by CSX. CSX’s arguments about the Meridian Speedway are unrelated to the transaction and should be ignored. CPKC will be eager to maintain or explore efficient interline relationships with CSX via all available gateways, and there is no need for relief protecting CSX.

• “BNSF’s veiled threats to demand future trackage rights it chose not to seek in this proceeding should be rejected with prejudice. BNSF’s desire for Board intervention in support of its quest for a future Mexican concession is not merger- related and would improperly involve the Board in Mexican affairs. BNSF’s proposed rights between Dallas and Shreveport would grant commercial rights BNSF chose not to acquire. BNSF’s proposed rights between Savanna, Ill. and Clinton, Iowa would grant commercial rights BNSF has previously sought.

• “The Board should not grant Union Pacific’s demand for conditions granting compulsory access to KCS’s self-funded new bridge at Laredo.

• “The Coalition [to Stop CPKC] communities demand mitigation measures disproportionate to the likely effects on the community. Hennepin County concerns fail for similar reasons. The Sierra Club’s requested conditions have no nexus to the transaction, which is expected to lower greenhouse gas emissions.

• “Concerns about CP’s tariff provisions applicable to hazardous shipments are not competitive issues or transaction-related and should be rejected. Concerns of certain wheat growers’ associations about potential competition from Canadian grain suppliers reflect more competition, not less … The late-submitted concerns of certain Federal Maritime Commissioners about diversions to Canadian ports are meritless.”

CPKC: CN, NS Seek Conditions

Written by Marybeth Luczak, Executive Editor

The Surface Transportation Board (STB) on July 1 accepted for consideration responsive applications by CN and Norfolk Southern (NS) regarding the Canadian Pacific-Kansas City Southern merger, which is under STB review and seeks to create North America’s first transnational freight railroad, Canadian Pacific Kansas City, or CPKC.

CP and KCS in September 2021 agreed to combine; STB in November 2021 accepted their application to form CPKC.

CP and KCS on May 13, 2022, submitted a revised operating plan as ordered by STB, and CN and NS on June 9 filed amended responses with each railroad requesting a number of conditions, including acquisition of the Springfield Line in Illinois and Missouri as well as certain trackage rights.

CN and its U.S. subsidiary Illinois Central Railroad Company (ICRR) seek, as a condition to any approval of the CP-KCS merger, approval of the sale of KCS’s line between Kansas City, Mo., and Springfield and East St. Louis, Ill., to ICRR.

“In connection with the line acquisition, ICRR also seeks acquisition of an 8.33% ownership share of Kansas City Terminal Railway Company (KCT), which would enable ICRR to operate over KCT-controlled trackage in Kansas City, and a 50% ownership interest in KCS’s International Freight Gateway terminal (IFG Terminal) south of Kansas City,” among other conditions, according to the STB decision (download below).

51298 Download

STB reported that NS is pursuing “certain contingent trackage rights for overhead movement on KCS’s line, between the connection of KCS with the Meridian Speedway, at Shreveport, La., at or near milepost V-169.85, and the Wylie Intermodal Terminal, in Wylie, Tex., at or near milepost T-197,” as a condition to any approval of the CP-KCS merger. The contingent trackage rights would apply only to intermodal traffic originating or terminating at the Wylie Intermodal Terminal, according to STB.

STB reported that it found “CN and NS’s responsive applications to be in substantial compliance with the regulations under which they were filed and finds no basis for rejecting them. The Board reserves the right to require supplemental information, if necessary. The Board also finds that it is not necessary to designate CN and NS’s proposed transactions as minor or significant.”

Formal written comments regarding the responsive applications are due by July 12, 2022. They must include “the commenter’s position in support of or in opposition to the transaction proposed in the responsive filing; any and all evidence, including verified statements, in support of or in opposition to the proposed transaction; and specific reasons why approval of the proposed transaction would or would not be in the public interest,” according to STB, which provides more information on filing requirements on its website.

Canada Investing $4.4MM to Improve Hudson Bay Railway Corridor Safety

Written by Marybeth Luczak, Executive Editor

July 13, 2022

“Our new investment will not only improve the safety and efficiency of Canada’s railways, but also strengthen our supply chain and tackle inflation by addressing bottlenecks, vulnerabilities and congestion along Canada’s trade corridors,” reported Transport Canada Minister Omar Alghabra reported in a July 13 Twitter post. (Photograph Courtesy of Alghabra via Twitter)

The government of Canada is committing C$4.4 million to identify potential mitigation strategies for permafrost hazards along the Hudson Bay Railway corridor in Manitoba, reported Minister of Transport Omar Alghabra on July 13.

The University of Calgary will undertake the study, and the results will be used “to ensure the safety and resiliency” of the corridor, which includes 627 miles of former CN trackage, according to Transport Canada. The funding is being provided through the National Trade Corridors Fund, which is described as “a competitive, merit-based program designed to help infrastructure owners and users invest in the critical transportation assets that support economic activity in Canada.”

Hudson Bay Railway (map above) is made up of 627 miles of former CN trackage. The network connects with CN in The Pas, running north through Manitoba to the Hudson Bay at the Port of Churchill. (Map Courtesy of Arctic Gateway Group)

“The Hudson Bay Railway corridor is a critical transportation, supply and tourism link for communities along the route, connecting Manitoba from north to south,” said Daniel Vandal, Canada’s Minister of Northern Affairs, and the Minister responsible for Prairies Economic Development Canada and for the Canadian Northern Economic Development Agency. “It also strengthens local economies by connecting the Port of Churchill to producers across the Prairies, supplying the world with Canada’s agricultural products and other goods. This funding will help address the hazards and impacts of climate change along the railway, keeping Indigenous and northern communities in Manitoba connected and safe.”

“Canada’s rail network is crucial to our supply chain,” said Minister Alghabra, who made the announcement at the CN Intermodal Terminal in Winnipeg. “Through the National Trade Corridors Fund and Rail Safety Improvement Program funding, we are addressing the impacts of climate change and improving the safety and resiliency of Manitoba’s rail network, thereby strengthening Canada’s trade corridors.”

Transport Canada last month announced that the Rail Safety Improvement Program for 2022-23 would distribute C$24 million to 147 grade crossing, infrastructure and research projects; C$700,000 in funding will go toward 10 projects in Manitoba.