Friday, September 30, 2022

“COVID-19 is pandemic, but poverty remains the real “plague” So, please don’t keep your eyes off the real “plague”

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Interview with Ambassador Sheikh Mohammed Belal, Managing Director of the Common Fund for Commodities on post COVID-19 world.

Q:   We know it is challenging time. This is almost a different world than what we have been living only a month or two ago. As a CEO of an organization dedicated to poverty alleviation, through commodity value chain upgradation, how do you see the future? 

A:   Thanks to Diplomat Magazine for making this space as we fight to deal with this pandemic of COVID-19 (C19). Indeed, it is hugely challenging time. But it is also far too early to know exactly how much the post C19 world will be different. 

On March 11, the World Health Organization declared the spread of Covid-19 a global pandemic. The United Nations Secretary-General Antonio Guterres has described the COVID-19 crisis as the most significant test humanity has faced since World War II. UNSG called for the creation of a $2 billion fund to support the most vulnerable countries during this crisis. 

The International Labour Organization (ILO) recently predicted that 25 million jobs could be lost worldwide as a result of COVID-19. For Africa – which should be creating 12-15 million jobs annually to keep up with a growing population – these figures could be catastrophic. The global downturn risks putting the continent into a negative, downward spiral.

As you are aware, developing countries, by virtue (or vice) of their commodity dependent economy is going to face the impact almost across the value chain. The largest fall in global commodity prices on record (-20.4% between February and March 2020), as reported by a UN document,  already made it abundantly clear that commodity sector deserve our utmost priority. A 9% year-on-year fall in global production and manufacturing output, now casts that the value of global merchandise trade will fall by almost 27% in Q2 2020. On the social side,  barring the  shocking loss of employment – a decline of almost 10.5% in total working hours, the equivalent of 305 million full-time workers. The crisis will push an additional 40 – 60 million people into extreme poverty. The impact is being felt in every region.

GDP in sub-Saharan Africa is projected to contract by –1.6 percent this year—the worst reading on record.While the effect across countries is expected to differ depending on factors like extent of diversification and dependence on tourism, no country will be spared. The ability of sub-Saharan African and a good many Asian and Latin American countries to mount the necessary fiscal response will require ample external financing on grant and concessional terms from the international community.

Q:      What the CFC is doing about the coronavirus outbreak?

A:      We, in the CFC (Common Fund for Commodities), are working hard to keep track of events and eventualities the best we could. Despite the lockdown, we have been trying our best to keep us in business. Given our robust IT infrastructure and cloud computing capability, the CFC is uniquely capable of working from remote.

Braving all the failings of lockdown, we are happy to see our member states lived up to its mission, when they responded so overwhelmingly to make our first ever virtual Executive Board Meeting (EB69) a huge success.   On 08 April 2020, interestingly when I formally took up my assignment as Managing Director of CFC, the Executive Board held its first ever zoom meeting, where Executive Directors of our Board participated from across the globe. 

The Executive Board considered and approved all projects recommended for financing. Executive Directors from Brazil to Ethiopia to Kenya to Senegal and Yemen attended the meeting. The recurrent theme of the discussion of the meeting was to keep the businesses of the Fund ongoing so that marginal people can get their livelihood maintained and mitigation for their losses could be undertaken, where necessary. 

CFC is only a tiny player in the big game of poverty alleviation and achievement of sustainable development goals. Without global solidarity and unity in addressing the root causes of poverty, we could hardly move beyond where we were. This pandemic truly proved that real plague is “poverty”, C19 is only an expression or symptom of that real plague. Unless and until, we get united to root out the plague of poverty, C19 could only be an avoidable eventuality. But the devastation that it has caused, should make us convinced that building walls or blocking travelers are hardly any solution to this problem. The real solution is only in working us together as a united humanity.

We, in the CFC, as an organization devoted to the socioeconomic development of commodity producers, remain acutely aware of its enhanced duties even at this time of pandemic, to provide all necessary support to our clients to see that projects remains on course, as best as it could. The CFC is, therefore, working hard to remain in touch with the project implementing authorities and thereby minimizing the effect of C19.

The CFC Secretariat will continue to monitor the situation and take all reasonable measures to protect CFC personnel and its clients, while minimizing the impact of the outbreak on the implementation of the CFC’s activities for 2020 and beyond. In the meanwhile, the CFC will like to the highlight the essentiality of enhanced global cooperation to keep the commodity supply chains as minimally impacted as possible, which is at the center of the CFC’s mission as an UN affiliated International Financial Organization.

The CFC will continue its quest to keep itself in a state of readiness so that resiliency in the supply chain maintains when lockdown restrictions imposed due to C19 begin to ease. We will have to work in unity and with solidarity with all our partners and peers to come out of it with as less disruptions as possible, while taking note of the positive silver linings, like more network preparedness and the necessity of online business connectivity between developing and developed world. We invite our clients and well-wishers to write to us at   COVID19-RESPONSE@COMMON-FUND.ORG   if they have any comment/suggestion/idea to share. 

Q:      What impacts are you anticipating due to COVID-19?

A:      On March 11, the World Health Organization (WHO) declared the spread of C19 a global pandemic. The United Nations Secretary-General Antonio Guterres has described the C19 crisis as the most significant test humanity has faced since World War II. UNSG called for the creation of a $2 billion fund to support the most vulnerable countries during this crisis. But actual cost may require substantially more. For every bankruptcy, closed store, unpicked crop or drop in online orders, people will lose jobs and families will, in many cases, lose their only income.

The International Labour Organization (ILO) recently predicted that 25 million jobs could be lost worldwide as a result of C19. For Africa – which should be creating 12-15 million jobs annually to keep up with a growing population – these figures could be catastrophic. The global downturn risks putting the continent into a negative, downward spiral.

According to the World Trade Organization, 87.5% of goods exported from LDCs are sold in 10 major markets, all of which are either severely or moderately affected by the C19 outbreak. Due to a fall in demand in these markets, LDCs are certain to lose a significant portion of their export revenues. This decline will make it impossible for LDCs to achieve Target 11 of the Sustainable Development Goal (SDG) 17 to double their share of exports.

A shortage of raw materials from China, due to supply chain disruptions will affect many LDCs. For example, shutdowns at Cambodia’s garment factories, which procure 60% of their raw materials from China, could affect 160,000 workers in a worst-case scenario.

LDCs are equally affected by declining orders or the cancellation of ready-to-ship orders by Western clothing brands, some of which have already closed outlets. As a result of these closures, Bangladesh alone has seen garment orders worth $3.0 billion being cancelled, affecting more than 1,000 garment factories and thereby putting almost 2 million jobs on the line.

On the whole, the developing countries need, in addition to support for their health sectors, is carefully thought out support packages to keep their economies afloat and protect micro, small and medium-sized enterprises (M/SMEs) from going out of business. The mitigation drive to keep them afloat is, therefore, a huge challenge for CFC. We are working, internally, to develop an emergency liquidity facility in consultation with the member states to mitigate the fallout of C19.

Avocato project

Q:      What lessons we could take from COVID-19 crisis?

A:      If previous crises are anything to go by, demand and export prices may well take a long time to rebound, while the limited supply and high cost of finance will likely further depress developing world economies. Longer term structural changes in demand are also likely. While the actual impact to rural communities will necessarily differ across countries and value chains, the economic livelihoods of smallholders are likely to be affected by a number of common factors.

It is anticipated that the reduction in the labour force will directly affect agricultural production, especially for labour intensive crops. Restrictions on trade and movements may also become a huge challenge in the short-term with producers failing to connect with their markets. On the mid and long-term, the lack of access to essential inputs such as seeds or fertilizers will impose additional complications to producers.

The pandemic is also changing consumers behaviour. Although food demand is generally inelastic and the effect on overall consumption will probably be limited, dietary patterns may change. So far, the most affected countries observed an increase in both staple and ready-to-eat food that can be stored for longer periods. However, learning from the experience of the 2008 financial crisis, it is expected that on the long-run food demand will also shrink as the global income is severely affected by the quarantine restrictions.

In-between the primary producers and the end-consumers, there are SMEs/SMMEs, the CFC is working with. They are key to connecting consumers with essential food supplies and producers with the income crucial to their livelihoods. And if supply chains break down now, these disruptions may become permanent unless early mitigations are not provided with. For example, even the best performing SMEs can go out of business because of liquidity crunch, something that is entirely preventable by providing emergency liquidity funding.

The CFC supports many good SMEs in its portfolio, and the Fund will continue to make sure they survive the crisis and flourish afterwards. The CFC is closely monitoring the situation of the commodity producers and it is actively engaging with its borrowers to understand the particularities of their challenges. The CFC has the facilities and experience in managing the necessary instruments and further measures will be taken to support qualifying SMEs to mitigate their losses and thereby weathering this storm. This will directly serve the mission of the CFC bringing the principles and fundamental goals of the CFC into practice.

On the whole, one fundamental lesson of the C19 is the realization that unless poverty is addressed globally, with a renewed sense of urgency, the spread of killing viruses like C19 could always run the risk of wreaking havoc in both developing and developed world.

This is why we have to start preparing now and encourage ourselves to herald a return to normal. There will, however, be no normal if we forsake the idea of humanity and turn our backs on those forgotten people, near and far. 

Therefore, CFC would remain on the lookout for being a part of a good ecosystem of business support actors, with shared objectives and complementary strengths, with priority for the more vulnerable at the margin, to deploy solutions for resilience and recovery.

Ambassador Sheik Mohammed Belal.

Q:      Do you mean to say that real pandemic is not COVID-19, it is poverty? Why?

A:      As I already mentioned about the real “plague” of poverty, I would urge all to pay greater attention to the elements of poverty and please don’t take your eyes off the real plague of “poverty”. This C19 pandemic should help us to know how dearly we need to address persistent structural problems facing the entire world. As this pandemic ought to aggravate deep seated inequalities between and within countries, we have to work extra harder to address the real plague of “poverty”.

As UNCTAD research already showed convincingly that the interplay between the C19 outbreak, the contraction in demand and the free-fall of international commodity prices will likely reverse the limited progress that has been made in poverty reduction. Meaning, this will take us further away from achieving the first United Nations Sustainable Development Goal of ending poverty in all its forms everywhere.

The results of UNCTAD research showed a three-percentage point decline in LDC poverty headcount, with more than 33 million additional people living in extreme poverty. C19 is affecting rich and poor differently and accordingly, the impact will also vary, and their treatment should also be different. As we came to experience that smokers’ run higher risks of aggravated C19, the society with advanced achievements in SDGs and the Paris Agreement on Climate change, would do better in facing the challenges.

We, therefore, must seize the opportunity of this crisis to strengthen our commitment to implement the 2030 Agenda and the 17 Sustainable Development Goals. By making progress on our global roadmap for a more inclusive and sustainable future, we can better respond to future crises and pandemics.

Q:      How CFC could work to avoid the negative impacts of COVID-19 in its member countries?

A:      We are aware of the fact that SMEs are likely to experience the worst outcome unless helped. The research conducted by the International Trade Center (ITC) showed four phases, either successively or simultaneously, as global trade stumbles – from shutdowns to disrupted supply, depressed demand, and eventually bouncing back in recovery. ITC has cautioned that SMEs in different sectors are affected in different ways, and policy responses must be carefully tailored. Therefore, the case has never been stronger for meeting Target A of SDG 8 to increase the Aid for Trade allocation to LDCs to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

In CFC, we are also trying to equip ourselves with relevant knowledge and expertise so that we could encourage our clients to keep track of traceability information on production and sustainable production so that they can meet enhanced expectation of consumers. Consumers are increasingly asking a variety of questions answered, such as: does your supply chain have poor labour conditions at farms or processors sites? What are the carbon emissions of your products? Do any links exist with deforestation and if so, how can these be improved? Adding to the resilience of farmers is our priority now.

We are also asking member states to guard enablers like creating economies of scale and, consequently, fast productivity growth. In such a strategy trade and external finance have important roles to play as enablers of domestic economic forces. In fact, if handled well, this pandemic could be turned into an opportunity to break away from conventional but self-defeating policy prescriptions like lower investment in health, education, environment and gender inclusiveness etc. This is why, we, in the CFC, are trying our best to work out with our clients to make them avail strategic choices to deal with this pandemic, while working for an emergency liquidity facility as well.

Q:      How do you like in Amsterdam? Do you miss The Hague?

A:      I miss The Hague. In a big way. Probably more than I thought I will be. 

Due to lockdown, I haven’t had enough opportunity to know Amsterdam more than I am already aware of. For me, the CFC is as much in Amsterdam as it were to be in The Hague. Not only we are anchored in all those embassies, representing our member states or Dutch Ministries and agencies providing us with assistances, keep us linked to the Hague much more than one could possibly think from distance. I personally remain deeply grateful to the Hague fraternity for their support and encouragement to me to take up this challenging duty. Indeed, those of us, who are fortunate to enjoy the bounties of the Hague fraternity, make us confident that we will come out stronger in a post-C19 world, if we remain united in our quest for a poverty free world for the humanity. Let love and compassion be our  compass as we follow this roadmap.

Project on sustainable cocoa & coffee production

NOTE: The Common Fund for Commodities (CFC) is an Amsterdam based autonomous intergovernmental financial institution established within the framework of the United Nations. The Agreement Establishing the Common Fund for Commodities was negotiated in the United Nations Conference on Trade and Development (UNCTAD) from 1976 to 1980 and became effective in 1989. The CFC has 101 countries as its member where it aims at achieving following mission and vision.

Mission: “To contribute to poverty alleviation by strengthening the income generating capacity of commodity producers and mitigating vulnerability to their economic well-being.”

Vision: “To strengthen and diversify the commodity sector in developing countries and transform it to be a major contributor to poverty alleviation and sustained economic growth and development.”

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Picture at Intro @BestSolicitors

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