ITCILO/ACTRAV COURSE A Capacity Building for Members of Youth Committees on the Youth Employment Crisis in Africa 26 to 30 August 2013 Macro Economic Framework and Employment Creation

Issues  Fiscal Policy  Monetary Policy  Investment Policy  Industrial Policy  Trade Policy

What is Fiscal Policy?  The use of government revenue collection (taxation) and expenditure (spending) to influence the economy.  Government taxation and government spending can affect the following variables in the economy: Aggregate demand and level of economic activity; The pattern of resource allocation; The distribution of income.

Stances of Fiscal Policy The three main stances of fiscal policy are:  Neutral Fiscal Policy  Expansionary Fiscal Policy  Contractionary Fiscal Policy

Methods of Funding  Taxation  Seigniorage, the benefit from printing money  Borrowing money from the population or from abroad  Consumption of fiscal reserves  Sale of fixed assets (e.g. land)

Economic Effects of Fiscal Policy  Governments use fiscal policy to influence aggregate demand in the economy aimed at achieving: Price stability Full employment Economic growth  Increasing government spending and decreasing tax rates is an essential tool for: Building the framework for strong economic growth Working towards full employment

What is Monetary Policy?  Monetary Policy is when a nation’s Central Bank increases the money supply or decreases it.  When interest rates are high: The money supply contracts The economy cools down Inflation is prevented.  When interest rates are low: The money supply expands The economy heats up Recession is avoided.

Investment Policy Definition:  An Investment Policy is any government regulation or law that encourages or discourages foreign investment in the local economy.  Global rules that govern economic integration discourage protectionist measures:  Directed at foreign investors that explicitly or “de facto” discriminate against them;  Directed at domestic companies that require them to repatriate assets or operations to the home country.

Continues… A good investment policies is one that strives to:  Create synergies with wider economic development goals or industrial policies, and achieve smooth integration in development strategies.  Foster responsible investor behaviour and incorporate principles of CSR.  Ensure policy effectiveness in their design and implementation and in the institutional environment within which they operate.

Continues… Key Investment Policy Challenges:  Integrating investment policy in development strategy  Incorporating sustainable development objectives in investment policy  Ensuring investment policy relevance and effectiveness  Balancing rights and obligations of States and Investors

Core Principles for Investment Policymaking Investment for sustainable development…overarching objective of investment policymaking Policy coherence…grounded in a country’s overall development strategy …coherent and synergetic Public governance and institutions…involving all stakeholders …standards of public governance …predictable, efficient and transparent procedures for investors Dynamic policymaking…regular reviews for effectiveness and relevance Balanced rights and obligations…setting out rights and obligations of States and investors in the interest of development Right to regulate…in the interest of the public good and to minimize potential negative effects Openness to investment…in line with development strategy …open, stable and predictable entry conditions … Investment protection and treatment…adequate protection to established investors …non- discriminatory Investment promotion and facilitation…aligned with sustainable development goals …minimize risk of harmful competition for investment Corporate governance and responsibility…promote adoption of and compliance with best international practices of CSR International cooperation…address shared investment-for-development challenges …avoid investment protectionism

Investment Policy Guidelines  Adoption of a broad road map for economic growth and sustainable development  Promulgation of rules and regulation on investment and in a range of other policy areas to ensure coherence.  Appropriate implementation and institutional mechanisms

Policy Coherence Initiative The goal policy coherence initiative is to ensure:  Coherence and interaction across policy areas  Better coordination among stakeholders The key elements of this approach are:  Better balance between objectives such as growth, equity, employment and Decent Work  More comprehensive policy mix and better sequencing to obtain these objectives  Creation of more policy space to implement national policy priorities

Industrial Policy  Industrial Policy – government-sponsored program in which the public and private economic sectors coordinate their efforts to develop new technologies and industries.  Government provides financial support and capital to the private sector through: Direct subsidies Tax credits Government run development banks Certain policies such as the ISI in favour of domestic industries  Industrial Policies are sector specific.

The End Thank You!