News Brief July 2007

OECD Observer

South Africa joins Anti-Bribery Convention; Economy; Rebalancing confirmed; Safer pensions; Investment trends; Greener export credits; Tax talks; High in fibre; China's environment; Lifting French spirits; European aid scrutinised; Biofuels lift farm prices-; -and sow uncertainty; Nuclear energy rises; Plus ça change

South Africa joins Anti-Bribery Convention
EconomyRebalancing confirmedSafer pensionsInvestment trendsGreener export creditsTax talksHigh in fibreChina's environmentLifting French spiritsEuropean aid scrutinisedBiofuels lift farm prices--and sow uncertaintyPlus ça changeNuclear energy rises
South Africa joins Anti-Bribery ConventionOn 19 June South Africa became the first African country to join the OECD’s Anti-Bribery Convention. Adopted in 1997 and ratified so far by 36 countries (including six non-OECD countries), the OECD Convention outlaws the bribery of foreign public officials in international business transactions.South Africa’s President Thabo Mbeki has been determined to fight corruption at all levels for many years, and the signing of the convention was a day of “strong emotions”, said Ambassador Nomasonto Maria Sibanda-Thusi. Mark Pieth, chair of the Working Group on Bribery said it was a crucial moment; because South Africa was such an important player on the world market, its adhesion was setting an example and sending an important message to emerging markets. South Africa would bring a valuable new perspective to the OECD’s fight against bribery, Mr Pieth said. See video clip at: further information about the Convention, see: rose in the OECD area by 0.6% in the first quarter of 2007, slightly slower than the 0.8% for the previous quarter. In the euro area GDP also rose by 0.6%, down from 0.9%. GDP for the US grew by 0.3%, the lowest growth rate seen since the first quarter of 2003, while Japan’s GDP rose by 0.6%, half the 1.2% rate it notched up in the previous quarter. The annual growth rate, however, was highest in Germany at 3.6% and the lowest in France at 2%.Consumer prices rose by 2.2% in the OECD area in the year to May 2007, unchanged from April 2007. On a monthly basis, the price level rose by 0.4% in May after a rise of 0.5% between March and April 2007. Food prices increased by 3.4% year-on-year in May, compared to 3.6% in April. Energy prices, however, rose by 2.6% year-on-year in May, up from 1.9% in April. Excluding food and energy, the 2.1% rise in consumer prices remained unchanged.The standardised unemployment rate for the OECD area was 5.5% in April 2007, 0.1 percentage point lower than the previous month and 0.6 percentage point lower than a year earlier. In the euro area, the standardised unemployment rate was 7.1% in April 2007, also 0.1 percentage point lower than the previous month and 0.9 percentage point lower than a year earlier. At 4.5% in May 2007, the US standardised unemployment rate remained the same as the previous month, and down 0.1 percentage point on a year earlier.For more data, see: confirmed The latest OECD Economic Outlook, issued in May, forecasts a soft landing in the US, a strong and sustained recovery in Europe, a solid trajectory in Japan and buoyant activity in China and India. But it warns too of risks posed by imbalances in current accounts and, possibly, in financial and housing markets. In the previous Economic Outlook in November 2006, the OECD took the view that the US slowdown was not heralding a period of worldwide economic weakness, but rather, a “smooth” rebalancing, with Europe taking over the baton from the US in driving OECD growth. Recent developments have broadly confirmed this prognosis. Chief economist Jean-Philippe Cotis notes in the Outlook’s editorial that “the current economic situation is in many ways better than what we have experienced in years.”OECD Economic Outlook No. 81 May 2007 is available at pensions? “People are living longer and need to be sure that their pensions are safe”, says OECD Secretary-General Angel Gurría, referring to the OECD Guidelines on Funding and Benefit Security in Occupational Pensions. The guidelines, for governments and regulators, are designed to improve how certain types of pension funds are run and “will be helpful to OECD countries to ensure that occupational pension plans offer secure retirement benefits to their members”.The guidelines build on a substantial body of research carried out by the OECD over the last several years and have benefited from input by the pensions industry, business and trade unions. They contain a series of recommendations concerning regulation of the funding of occupational pension plans, and in particular defined benefit pension schemes. One of the recommendations proposed is that regulators “put in place rules that determine to what extent the employer is responsible for filling any funding gap if a pension plan closes”.See the full text of the guidelines: trendsForeign direct investment (FDI) into OECD countries rose 22% in 2006, to reach its highest level since 2000. Inward FDI rose to US$910 billion in 2006, up from $747 billion in 2005 and $491 billion in 2004, according to the latest OECD estimates. The near-term outlook for FDI remains strong, buoyed by high corporate profits, low interest rates and robust economic growth. A new OECD report, Trends and Recent Developments in Foreign Direct Investment, forecasts FDI to increase by a further 20% in 2007.The US was by far the world’s largest recipient of FDI in 2006, attracting $184 billion from OECD countries. This is the largest amount of direct investment in the US economy since 2001, in part due to a decline in the exchange rate value of the US dollar. Most of this FDI went into takeovers of existing firms, while greenfield investment accounted for just $14 billion.The US was also the leading foreign investor in OECD countries, with $249 billion, followed by France with $115 billion.One of the most important trends is the emergence of a number of major international investors domiciled in developing countries. For instance, in 2006 India’s Tata Steel bought the Anglo-Dutch Corus to create the world’s fifth-biggest steel firm, while Brazil’s CVRD became the world’s second-largest mining company by acquiring Inco of Canada. See export creditsOECD countries have called for stronger environment-related requirements for export deals, to qualify for export credit backing from their governments’ Export Credit Agencies (ECAs).In an agreement that replaces a 2003 Recommendation, OECD governments will be required to review projects for their potential environmental impacts, and to benchmark them against international standards. The agreement also calls for more public disclosure of information, which will increase transparency for the most sensitive projects.Governments provide official export credits through ECAs to support national exporters competing for overseas sales. In 2005, the amount of business covered by such support was in excess of US$65 billion.For more on export credits, see: talksJersey, one of the Channel Islands, has signed a bilateral agreement with the Netherlands in June to exchange information for tax purposes, based on the OECD Model Agreement for Exchange of Information in Tax Matters. The agreement between Jersey and the Netherlands follows a similar agreement signed by Jersey in 2002 with the US.Nordic finance ministers also announced progress towards tax information exchange agreements, with other offshore financial centres: Aruba, the Isle of Man, Jersey and the Netherlands Antilles. Ministers representing Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden announced plans to conclude a number of tax information exchange agreements within the next few years.A total of 33 jurisdictions have committed to work with OECD countries under the under the auspices of the OECD’s Global Forum on Taxation, to improve transparency and to establish effective information exchange for tax purposes.For more on the OECD Tax Information Exchange Agreements: High in fibreTelecommunications investment continues to rise and consumers are generally paying less for more and better services across the OECD area, but a new report also warns of new technology challenges for operators.The OECD Communications Outlook 2007 reports that access to broadband high-speed Internet across OECD countries continues to rise, with over 60% of the OECD’s area 256 million Internet subscribers having a broadband connection at the end of 2005. But a question for telecom operators is how much and how soon they should invest in next-generation networks, such as fibre-optics, rather than traditional copper networks?The OECD expects consumer and business demand for fibre to rise since more data can be delivered faster over fibre than over cable or DSL, which is important for emerging services such as high definition television, the report says. Several operators have already made the move. Japanese fibre subscribers can download (and upload) at 100 Mbits per second–ten times faster than the OECD average. And Japan’s price per Mbit/s is the lowest in the OECD at $0.22 per month!But who should pay for installing new fibre networks and who should own them? According to the report, the countries that have started stimulating fibre development have each taken different approaches. The OECD Communications Outlook 2007 also reports on telecommunication developments in Brazil, Russia, India, China and South Africa, which are among the fastest growing markets.The OECD Communications Outlook 2007 also reports on telecommunication developments in Brazil, Russia, India, China and South Africa, which are among the fastest growing market.See’s environmentChina’s economic and industrial power has come at high cost to the environment and redoubling efforts to improve the environment could help the country achieve sustainable economic growth, the OECD says in a new report to be released in July. The OECD shares the Chinese authorities’ concerns about the country’s worsening environment and calls on state and territorial governments to strengthen enforcement of policies and to address finance.The report, which is part of the OECD’s environmental review series, makes 51 specific recommendations, and builds on more than a decade of OECD-China cooperation.For more detail visit and http://www.oecdbookshop.orgLifting French spiritsWith France’s elections now over and a new president and government in place, people are wondering what action might be taken to lift the economy out of its recent relative sluggishness. The latest OECD Economic Survey of France, published after the elections in June, notes that the French have a high standard of living but that public confidence has been at a low ebb.A key reason is the economy, which, though improving, is operating below potential. In 2007 projected growth at 2.2% will be little higher than in 2006, and likely slower than in Germany–a turnaround from performance in recent years. One problem the France report highlights is a dual labour market of “insiders” who have secure permanent contracts, and “outsiders” on short-term contracts, with unskilled and skilled alike scrambling often until their 30s before getting a permanent position. While being on the inside may offer some protection, even mid-career people can feel insecure, since losing their job would push them outside again, with no obvious way back in.One solution examined would be to unify those contracts, creating flexibility in the early phases and improving security with seniority. This would improve employment opportunities for everyone. The Economic Survey of France also focuses on reforms in education, and issues whose resolution could indirectly raise economic potential, particularly pension reforms and decentralisation.The survey further examines how to alleviate poverty and social exclusion. It emphasises that the incidence of (relative) poverty in France is low by OECD standards and only slightly higher than in the Nordic countries. Even so, poverty is a prominent issue in France, against the backdrop of the traditional “republican values” of liberty, equality and fraternity, which can also be read as a call for territorial and social cohesion. Indeed, the report recommends that it is the geographical concentration of poverty that policies should target, as well as tackling issues related to labour force participation among the low-skilled and older people.The Economic Survey of France ISBN 978-92-64-02986-6, can be ordered at and a policy brief are available at other recent economic surveys, see the New Publications section.European aid scrutinisedThe European Commission disbursed $10 billion in official development assistance (ODA) in 2006, making it the sixth largest donor among the members of the OECD’s Development Assistance Committee (DAC), a group which provides some 90% of global bilateral ODA. The Commission also plays a “federating” role for the institutions of the 27 member states of the EU–together they account for more than a half of the total.DAC commended the Commission’s role in reshaping its development co-operation, though notes a number of challenges, continuing to reform the relevant institutions, and to simplify procedures in a bid to improve policy coherence. The DAC peer review was led by the US and Australia on 26 June 2007. See lift farm pricesBiofuels lift farm pricesIncreased demand for biofuels is fundamentally changing agricultural markets and could drive up world prices for many farm products, according to a new report published by the OECD and the UN’s Food and Agriculture Organisation (FAO). Droughts and low stocks fuelled recent hikes in farm commodity prices, but long-term structural shifts are underway which could bolster high prices for many products in years ahead.The OECD-FAO Agricultural Outlook 2007-2016 says reduced crop surpluses and a decline in export subsidies have also contributed to these trends. But more important is the growing use of cereals, sugar, oilseed and vegetable oils to produce the fossil fuel substitutes, ethanol and biodiesel.In the US annual maize-based ethanol output is expected to double between 2006 and 2016. In the EU the amount of oilseeds (mainly rapeseed) used for biofuels is also set to double from just over 10 million tonnes over the same period. In Brazil, annual ethanol production is projected to reach some 44 billion litres, up from around 21 billion today, while Chinese ethanol output should rise to an annual 3.8 billion litres, up 2 billion on current levels.See, and and sow uncertaintyDo biofuels produce higher emissions than petroleum? There is a high degree of uncertainty about this question, experts believe. For Jack Short, secretary-general of the International Transport Forum, few biofuels seem to offer much in the way of climate protection or oil security and are an expensive way of addressing these concerns. Mr Short was speaking at a meeting of leading transport, energy and environmental experts in Paris on the sustainability of transport fuels. Brazil’s sugar cane ethanol is efficient because it is easier to turn into alcohol than starch from corn, and its waste is used in distilleries, experts heard. But otherwise, though second generation biofuels may bring some improvements, even new plants aiming at mass production cause uncertainty, not only because of their impacts on land use, soil fertility and water pollution, but because they depend on large subsidies. Financial support for biofuels already totals around $15 billion a year in the OECD as a whole and experts at the meeting believe much cheaper ways of saving fuel and reducing emissions are available. The International Transport Forum, a global organisation which replaces the more narrowly geared European Conference of Transport Ministers, will hold its first major conference on climate change in Leipzig, Germany in 2008. See http://www.internationaltransportforum.orgPlus ça change...The interdependence of national economies has necessitated a far-reaching international co-ordination of policies. The virtually continuous confrontation of these policies as practised by the OECD probably represents the greatest advance so far achieved in this direction. This is far from claiming that the system has reached perfection. […]More rigorous methods of international co-operation and co-ordination can easily be imagined. But national sovereignty remains an inescapable fact, and it is unrealistic to contrive a system which disregards it. […]During the past 15 years, it has had a deep influence on the economic policies of the countries which today form the OECD. “The confrontation of economic policies within the OECD” in No. 3, March 1963Nuclear energy risesTotal nuclear electricity generation in the OECD area increased by approximately 1.8% in 2006, OECD Nuclear Energy Agency (NEA) figures show. Total electricity generation in OECD countries rose to just over 9,867 TWh in 2006, about 0.5% above 2005, and nuclear power plants provided 23.1% of this electricity, up from 22.8% in 2005.Nuclear Energy Data 2007 reports that at the start of 2007, there were 346 nuclear units in operation in 17 OECD countries, with 10 more under construction: four in Korea, three in Japan, two in the Slovak Republic and one in Finland. Firm commitments have been made for the construction of 15 more reactors, 14 of which in the OECD Pacific region. Six units were shut down during 2006, of which four in the UK, and another 10 units are expected to be shut down before 2011, of which all but one in Europe.Nuclear Energy Data 2007 can be ordered from, ISBN 9789264034532. For more information, see:©OECD Observer No. 262, July 2007      

Economic data

GDP growth: -9.8% Q2/Q1 2020 2020
Consumer price inflation: 1.2% Aug 2020 annual
Trade (G20): -17.7% exp, -16.7% imp, Q2/Q1 2020
Unemployment: 7.4% Aug 2020
Last update: 13 Oct 2020

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