Mainstreaming Aid for Trade: Where Do Cambodia and Laos Stand?

Transcription

1 Mainstreaming Aid for Trade: Where Do Cambodia and Laos Stand? Mona Haddad Sector Manager International Trade Department World Bank Siem Reap, Cambodia May 29, 2009 Regional Meeting on Aid for Trade for Asia and the Pacific

2 Mainstreaming trade into country strategies Why? Economies that are more integrated into the world economy have grown more and through longer periods The objective is to access cheaper inputs and capital and consumers goods, and to produce/sell more products on domestic and foreign markets 2

3 Trade performance in East Asia % Merchandise trade in % GDP Source: World Bank database 3

4 4

5 Presentation Matching supply and demand in aid for trade Mainstreaming trade in Cambodia and Laos Impact of the crisis

6 Aid for Trade: Matching Supply and Demand

7 Is Aid for Trade Enough? Which countries might have a potential demand for aid for trade, either because of poor trade performance or because of capacity constraints that hamper trade? Is the supply of aid for trade going to countries that have a potential demand for it? Which countries are receiving below average aid for trade relative to their potential demand?

8 Trade-related technical assistance Number of projects, FY02-08 Breakdown by Region, FY MNA 15% OTH 2% SAR 7% AFR 25% LCR 7% Source: Business Warehouse 8

9 Potential demand arises from poor trade performance and weak trade capacity Trade performance Several ways to measure.. 1. Growth rate of exports of goods and services 2. Change in global market share 3. Change in competitiveness in existing markets 4. Growth rates of export markets product and geographic markets 5. Degree of export concentration

10 Trade performance varies but 29 low income countries figure in the bottom two quintiles Bosnia Zambia Rwanda Vietnam Mozambique Cambodia Lao PDR Guinea-Bissau Cape Verde Myanmar Burundi Azerbaijan Grenada Ethiopia Armenia Lesotho India Bhutan Bangladesh Mali Georgia Haiti Nicaragua Uganda Angola Congo, DR. Mauritania Ghana Moldova Burkina Faso Bolivia Nepal Pakistan Tanzania Côte d'ivoire Sri Lanka Tajikistan Congo, Rep. Gambia, The Sierra Leone Niger Cameroon Madagascar Honduras Uzbekistan Kenya Nigeria St. Lucia Samoa Kyrgyz Republic C. African.Republic Djibouti Eritrea Benin Zimbabwe Senegal Yemen, Rep. Guinea Guyana Malawi 1 st quintile 2 nd quintile 3 rd quintile 4 th quintile 5 th quintile Source: Authors calculation. World Bank,WTI Note: Quintile scale are from the entire sample of low and middle income countries

11 Despite export growth, about half of LICs lost market share Low income countries: Change in market share, I n d i a Viet Nam N i g e r i a A n g o l a Azerbaijan Equatorial Guinea S u d a n C a m b o d i a B a n g l a d e s h Chad Y e m e n M y a n m a r Zambia M o z a m b i q u e G e o r g i a Congo Bolivia G h a n a M o n g o l i a Nicaragua A r m e n i a C a m e r o o n E t h i o p i a Mali Cape Verde H a i t i L e s o t h o T a n z a n i a L a o s R w a n d a Sierra Leone G u i n e a - B i s s a u M a u r i t a n i a B u r u n d i C o m o r o s Kyrgyzstan B u r k i n a Faso D j i b o u t i M a l d i v e s D o m i n i c a Saint Lucia N i g e r Madagascar U g a n d a C e n t r a l African Gambia E r i t r e a H o n d u r a s Moldova K e n y a B e n i n Malawi G u y a n a S e n e g a l Guinea Congo DR Uzbekistan Nepal C ô t e d'ivoire Sri Lanka Papua New P a k i s t a n 1 st quintile 2 nd quintile 3 rd quintile 4 th quintile 5 th quintile Source: Authors calculation. Wolrd Bank,WTI Note: Quintile scale are from the entire sample of low and middle income countries

12 Sources of export growth: competitiveness or demand growth? Gaining competitiveness in slow growing markets Competitiveness effect Gaining competitiveness in fast growing markets + - Azerbaijan, Bangladesh, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Burkina Faso, Cambodia, Chad, Comoros, Djibouti, Ghana, Haiti, India, Kenya, Kiribati, Laos, Mali, Mauritania, Mozambique, Rwanda, Samoa, Sierra Leone, Solomon Is, Sri Lanka, Tajikistan, Togo, Uzbekistan, Vanuatu, Viet Nam. ++ Angola, Armenia, Cape Verde, Congo, Equatorial Guinea, Georgia, Myanmar. Losing competitiveness in slow growing markets -- Burundi, Cameroon, Central Afr. Rep., Côte d'ivoire, Congo D. R., Dominica Eritrea, Ethiopia, Gambia, Grenada, Guinea, Guinea-Bissau, Guyana, Honduras, Liberia, Madagascar, Malawi, Maldives, Moldova, Nepal, Nicaragua, Pakistan, Papua New Guinea, Saint Lucia, Saint Vincent, Sao Tome and P., Senegal, Somalia, Sudan, Tanzania, Tonga, Uganda, Zambia, Zimbabwe. Source: Authors calculations based on International Trade Center, Trade Performance indicator +- Kyrgyzstan, Mongolia, Niger, Nigeria, Yemen. Demand Losing competitiveness in fast growing markets

13 Dependence on a few exports exposes countries to terms of trade shocks Terms of trade volatility 30 Developing Countries: Terms of trade volatility ( ) Concentration Index Source: Authors calculation based on World Bank, Wolrd Development Indicators and World Trade Indicators

14 Concentration Index average Low income countries I n d i a Bosnia and Herzegovina D j i b o u t i G e o r g i a Viet Nam P a k i s t a n Sri Lanka Madagascar Nicaragua Moldova, Rep.of Bolivia S e n e g a l Nepal K e n y a H o n d u r a s Zimbabwe Tanzania, United Rep. of M y a n m a r Togo Lao People's Democratic Republic A r m e n i a Kyrgyzstan Grenada G u y a n a C ô t e d'ivoire Bhutan U g a n d a Uzbekistan E r i t r e a C a m b o d i a Gambia M o n g o l i a Saint Vincent and the Grenadines B a n g l a d e s h E a s t T i m o r Papua New Guinea L e s o t h o G h a n a D o m i n i c a N i g e r Cape Verde M a l d i v e s C a m e r o o n M o z a m b i q u e H a i t i V a n u a t u Saint Lucia R w a n d a E t h i o p i a C e n t r a l African R e p u b l i c Tonga T a j i k i s t a n Democratic Republic of the Congo Zambia Malawi S u d a n Guinea B e n i n Azerbaijan Solomon Is Kiribati B u r k i n a Faso G u i n e a - B i s s a u S a m o a M a u r i t a n i a Mali B u r u n d i Sierra Leone C o m o r o s Congo Equatorial Guinea Y e m e n Sao Tome and Principe A n g o l a N i g e r i a st quintile 2 nd quintile 3 rd quintile 4 th quintile 5 th quintile Source: Authors calculation. Wolrd Bank,WTI Note: Quintile scale are from the entire sample of low and middle income countries

15 Besides trade performance,, potential demand should include trade capacity Infrastructure 1. Quality of infrastructure and information technology LPI (2) Institutions 2. Quality of customs LPI (3) 3. Time to export Doing Business Incentives 4. Peak tariffs (# of lines 3x average tariff level) 5. Tariff overall restrictiveness index - OTRI

16 Infrastructure, institutions and incentives influence trade Effects of 1% change in infrastructure, institution, and incentive on exports Infrastructure Institutions Incentives Transport and IT Time to export Customs efficiency Trade restictions Tariff peak Control variables (selected) b WTO FTA a a Distance GDP of importer Change in exports % Note: Marginal effects calculates at the average of the sample. a represents the change passing from zero to one. The rest of the variables refers to change of 1 percentage point. b Other control variables are listed in the Annex.

17 About 60% of LDCs figure in the bottom two quintiles of infrastructure rankings for all developing countries 100% 80% 60% 40% Passing from the fourth quintile to the third quintile raise trade by 35% 20% 0% LDC Other low income Middle Income Source: Authors calculation based on World Bank, LPI Indicators

18 Quantifying potential demand adding it up Trade performance 1 Growth of exports 2 Change in market share 3 Competitiveness in existing markets 4 Demand structure 5 Concentration- diversification Capacity 6 Infrastructure 7 Customs 8 Time to export 9 Tariff peaks 10 Overall tariff restrictiveness Score every country on 10 dimensions 1 for highest quintile to to 5 for lowest quintile Least demand (best score) = 10. to highest need for aid for trade = 50

19 Potential demand for aid for trade Countries in the bottom two quintiles Congo Lesotho Tanzania Moldova Gabon Colombia Vanuatu Laos Haiti Gambia Zambia Uganda Sudan Mauritius Kyrgyzstan Saint Vincent and the Sao Tome and Principe Burundi Paraguay Mali Guinea Ethiopia Burkina Faso Solomon Is Yemen Syrian Arab Republic Comoros Rwanda Papua New Guinea Niger Madagascar Micronesia Fiji Nepal Eritrea Tajikistan Namibia Uzbekistan Jamaica Congo DR Benin Somalia Samoa Malawi East Timor Central African Sierra Leone Guyana Source: Authors calculation based on data from ITC and World Bank.

20 Does potential demand match supply? Aid for trade (GDP) is determined by potential demand, p.c. income, and aid effectiveness Supply of aid for trade /GDP BIH GEO ARM NIC VUT SLB Good news: positive correlation Other news: many countries underserved VNM LBR MOZ IND DMA MNG TMP STP MRT BOL LCA AZE LAO CAF CMRKGZ BEN KHM HTI TON CPV ZMB COG COM LKA MDA PNGTJK SEN KEN BTN GNB GRD HND GIN AGO SDN KIR BFA YEM LSO GMB GHA ETH RWA NPL BDI PAK MLI MWI UZB BGD TZA DJI MDG CIVNGA SLE NER UGA ZAR MDV ERI GNQ GUY TGO TCD Potential demand for aid for trade Source: Authors calculation based on 2006 cross section regression

21 Conclusions Aid for trade potential demand outstrips current supply While trade performance of developing countries as a group has been strong, many countries are performing below average and many countries are vulnerable to a slowing global economy Particular at risk are those with poor trade performance slow growth, declining market shares, and concentrated exports and those with poor infrastructure, institutions and export incentives While aid for trade supply is broadly correlated with potential demand, still, several countries that have the highest potential demand are receiving less- than- average levels of aid for trade.

22 Mainstreaming Aid for Trade in Cambodia and Laos

23 Mainstreaming Trade in Cambodia Integrated Framework in 2002, 2007 Successful integration of trade reform into national development strategy Consultative approach to Aid for Trade Aid coordination and harmonization among donors Strong partnership between development partners and private sector

24 Trade Sector Wide Approach Overall strategy for trade reform through aid for trade framework Strong partnership between government and development partners Development partners contribute specific activities in area of expertise no duplication Government and development partners review progress on quarterly basis

25 Success Elements Government ownership/leadership Sub-steering committee on trade under MOC Strong government leadership Sector-wide approach not project focused Well funded Multi-donor trust fund finances Trade SWAp Donor coordination Coordinated support from donors Private sector involvement Key stakeholders in doing trade Monitoring and accountability

26 Trade SWAp: 3 Pillars Cross-cutting reforms TBT/SPS; trade facilitation/customs; investment promotion; legal reform; IP Sector-specific reforms Value chain analysis; garment and footwear; tourism; rice; rubber; fisheries Capacity development MOC and related line ministries; provincial departments; public-private partnerships

27 Trade Facilitation and Competitiveness Project Application of ICT to border management Process re-engineering Export promotion Legal and judiciary framework Capacity building Trade infrastructure

28 Border management reform Customs automation through ASYCUDA System operational in Sihanoukville port; option to roll out in 5 other ports Risk management and post-clearance audit for quicker import and export process Inter-agency agreements to define responsibilities in clearance process Many donors involved Merit-based pay incentive

29 Export competitiveness Partner with individual firms to find overseas markets for their output Target firms to form cluster of new exporters in each sector TA to Department of Export Promotion Matching grant to cover up to 50% of cost of achieving market standards

30 Mainstreaming Trade in Laos Integrated Framework in 2006 National Implementation Unit Donor and government stakeholders World Bank: Poverty Reduction Support Operation Customs and Trade Facilitation Project Trade Development Facility

31 Laos: Poverty Reduction Support Operation Revising Customs law Developing and implementing national trade facilitation action plan Complying with ASEAN and WTO requirements

32 Laos: Customs and Trade Facilitation Project Simplification of customs procedures, elimination of duplication and redundancy Reduction of transaction costs and time to clear goods Increased transparency and accountability Implementation of automated customs system ASYCUDA World Customs modernization support

33 Laos: Trade Development Facility Simplified bureaucratic procedures Improved legal and regulatory framework, especially in SPS/TBT Enhanced capacity of line ministries and agencies involved in trade Improved private sector capacity to compete Strengthened national implementation unit

34 Impact of the Crisis

35 70% of the global economy is in recession Growth of real GDP, percent change annualized Q1 Q2 Q United States Euro Area Japan Source: World Bank and National Agencies. 35

36 Global trade volumes to decline by 6.1 percent in 2009 and recover in 2010 Annual percent change in the volume of exports of goods and services 20 Developing countries High-income countries Source: World Bank, DEC Prospects Group.

37 Trade In All Regions Is Affected Export Growth by Region, Jan 08 Feb 09, yoy change jan feb mar apr may jun jul aug sep oct nov dec jan feb EAP ECA LAC MENA NOA SAS SSA Source: Datastream, U.S. Commerce Department and authors calculations. Simple average of growth rates across economies within regions for a balanced sample of 45 economies reporting data 37

38 East Asia will rebound in 2010 Source: World Bank Development Prospects Group

39 Services trade is more robust Brazil Canada Indonesia Mexico United States Switzerland Australia New Euro France Zealand Germany area Italy Poland Netherlands United Czech Portugal Kingdom Republic Spain Hungary Slovak Republic Denmark Belgium Finland Korea Greece Luxembourg Ireland Sweden Norway Turkey Japan Growth Rate Services Imports Quarterly Growth Rates Imports 45 degree line

40 Financial crisis has dried up trade finance -- strangling exporters $million short term trade finance (structured) in emerging m Trade credit spreads (bp) Brazil Korea India Turkey Indonesia China Russia est 40

41 World Bank Group trade finance initiatives A focus of the G20 summit. IFC Global Trade Finance Program (GTFP) Offers guarantees for trade finance risks commercial banks do not want to take 2,500 transactions in last 3 years for over US$3 billion in guarantees Doubling of GTFP capacity from $1.5 to $3 billion in December 2008 New Global Trade Liquidity Program (GTLP) IFC commits US$1 billion over 2-3 years and mobilizes 2-3 times that amount from program partners (Govt s s and other MDBs) Resources used to fund self liquidating short term trade transactions, partnering with 5-10 major utilization banks IFC and Program Partners to provide trade funding (pro rata) to Utilization Banks for up to 40% of their trade program Other World Bank support Operations in support of Exim banks, SMEs, and regional trade finance initiatives. These amount to about $4 billion, including $2.6 billion of new projects under development or accelerated because of the crisis. These programs are expected to contribute up to $40-45 billion in trade finance over two years 41 41

42 Several countries have adopted new protectionist measures Trade restrictions are numerous Mesures taken from October February 2009 (number of measures) Trade restricting proposed w/o decision implemented rejected liberalizing Source: World Bank staff, List of Trade -related Measures, February Excludes anti - dumping cases. Rich countries subsidize... poor countries use barriers Developed countries Subsidies and other support packages 100% Types of measures Import Ban 9% Developing countries Subsidies and other support packages 31% NTM 11% N = 12 N = 35 Import duty 49% Source: World Bank staff, List of Trade -related Measures, February Excludes anti - dumping cases. 42

43 Anti-dumping cases are increasing Anti-dumping cases are up......and growing rapidly Anti -dumping cases, Growth anti -dumping cases Antidumping Initiations Antidumping Imposed Growth rate of AD 20% 10% 0% Average Jan 07- June 08 Developing countries Developed countries Source: Chad Brown, Global Anti Jul 08 - Dec Average Jan 07 - June 08 -dumping Database, World Bank forthcoming. Jul 08 - Dec 08-10% -20% -30% -40% AD Initiations AD measures Source: WTO, Anti -dumping Database ( ) and Chad Brown, Global Anti - dumping Database, World Bank forthcoming

44 Pressing ahead with trade reform Avoidance of protectionist responses is paramount to preserve the mutual benefits of trade and to support economic recovery Actions to improve competitiveness and diversify exports through trade facilitation and related support measures remain key for developing countries The crisis increases the urgency of revitalizing and bolstering multilateral cooperation in the trade area including through fulfillment of Aid for Trade commitments by high-income countries and support by international institutions 44

45 Aid for Trade to Reduce Trade Costs in the Crisis More, not less, is needed Focus on low-hanging fruits to reduce trade costs in the short term Quick measures to improve competitiveness Good time to push reforms Easier said than done

46 Mainstreaming Aid for Trade: Where Do Cambodia and Laos Stand? THANK YOU Mona Haddad World Bank Regional Meeting on Aid for Trade for Asia and the Pacific