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Towards the Global Review on Aid for Trade 2009: Issues and State of Implementation in Africa E c o n o m i c C o m m i s s i o n f o r A f r i c a Does.

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Presentation on theme: "Towards the Global Review on Aid for Trade 2009: Issues and State of Implementation in Africa E c o n o m i c C o m m i s s i o n f o r A f r i c a Does."— Presentation transcript:

1 Towards the Global Review on Aid for Trade 2009: Issues and State of Implementation in Africa E c o n o m i c C o m m i s s i o n f o r A f r i c a Does Supply Meet Demand Stephen N. Karingi, United Nations Economic Commission for Africa

2 AfT Pivotal to Africa’s Development - Recap Why is AfT important to African countries?  To fully benefit from international trade reforms ( WTO negotiations, EPAs with EC, etc)  To address the continent’s major trade constraints (high trade costs, weak trade-related institutions, poor infrastructure, uncompetitive productive capacities, export concentration, commodity-export dependency, etc)  To foster regional integration  To contribute to the MDGs (reports show that many African countries, in particular LDCs, are lagging behind)  To fully benefit from international trade reforms ( WTO negotiations, EPAs with EC, etc)  To address the continent’s major trade constraints (high trade costs, weak trade-related institutions, poor infrastructure, uncompetitive productive capacities, export concentration, commodity-export dependency, etc)  To foster regional integration  To contribute to the MDGs (reports show that many African countries, in particular LDCs, are lagging behind)

3 AfT can improve Africa’s trade performance trend Africa’s Share of World Trade ( Exp+Imp %) Source: WTO (2008)

4 Through improved competitiveness via lower costs  Better infrastructure can reduce transport costs. By some estimates:  For coastal countries by at least 40% and for landlocked ones by 60%.  This raises competitiveness. It has been shown that a 10% rise in transport costs reduces trade volumes by up to 20%.  Improving trade facilitation by reducing time delays by 1 day can lead to at least 1% increase in trade.  Better infrastructure can reduce transport costs. By some estimates:  For coastal countries by at least 40% and for landlocked ones by 60%.  This raises competitiveness. It has been shown that a 10% rise in transport costs reduces trade volumes by up to 20%.  Improving trade facilitation by reducing time delays by 1 day can lead to at least 1% increase in trade.

5 The AfT monitoring framework  Monitoring has been advocated to see whether flows meet right needs.  Monitoring will also help track progress in implementation.  Monitoring broken into three issues:  The supply side.  The demand side - resource use and trade performance.  Trade mainstreaming.  The indicators for monitoring are still being discussed.  Monitoring has been advocated to see whether flows meet right needs.  Monitoring will also help track progress in implementation.  Monitoring broken into three issues:  The supply side.  The demand side - resource use and trade performance.  Trade mainstreaming.  The indicators for monitoring are still being discussed.

6 AfT Supply To African Countries: a positive trend? World Total ODA: Total AfT: Africa Total ODA: Total AfT: Total Non-AfT: AfT flows, commitments current prices (US$ Billions) Average Growth Rates for Africa (02-06): -ODA: 23.5% -AfT: 12.8% -Non-AfT: 27.7% It is important that Advocacy for AfT is not carried out to the detriment of other forms of Aid

7 AfT Supply to Africa: a positive trend? Some patterns to highlight:  AfT funds to Africa reached US$ 10.5bn in 2006, over US$ 6.4bn to LDCs (33).  At the regional level positive sustained growth, but volatility at the country level.  Although AfT shows a positive growth trend, the share on total ODA to Africa has shrank to 21% in 2006 from 29% in  LDCs show a slowdown in 2005 and 2006 with AfT growth rates of 5.9% and 0.4%, well below the five years average. Some patterns to highlight:  AfT funds to Africa reached US$ 10.5bn in 2006, over US$ 6.4bn to LDCs (33).  At the regional level positive sustained growth, but volatility at the country level.  Although AfT shows a positive growth trend, the share on total ODA to Africa has shrank to 21% in 2006 from 29% in  LDCs show a slowdown in 2005 and 2006 with AfT growth rates of 5.9% and 0.4%, well below the five years average.

8 AfT Supply to African LDCs: a positive trend Total AfT to LDCs:3,9314,9766,0916,4536,479 Total AfT to non- LDCs: 2,6082,6532,9463,0814,080 Africa’s Total AfT flow: 6,5407,6309,0379,53510,560 AfT to LDCs growth rates(%): Share AfT to LDCs on Total AfT(%): AfT flows to LDCs not at the detriment of non-LDCs

9 AfT Supply to Africa: aggregate top recipients African selected Economies Economic Infrastructure Building Productive Capacities Trade Policy and Regulations Trade-related adjustments 1 Tanzania ,018 2 Ethiopia1, Mozambique ,369 4 Egypt7481, Ghana ,417 6 Uganda ,252 Africa’s Total AfT by WTO Category 14,13512,9321,08715, Aggregate flows, current prices (US$ millions) For the period Africa received more than US$ 43bn according to the AfT OECD purpose codes Any results!?

10 AfT Supply to Africa:  Total AfT to African Countries: US$ 43bn.  Trade-related adjustment accounts for US$ 15.1bn, 35% share on total AfT received, however a trade-related interpretation of the above WTO category is challenging (proxy used is General Budget Support of CRS of OECD, very, very broad).  Economic infrastructure accounts for roughly over US$ 14.1bn, share of approx. 33% of total AfT received. Up-grade and maintenance of infrastructure is a priority concern for African LDCs (although some infrastructure projects accounted in the WTO category may not be strictly linked to trade issues, however good proxy).  Total AfT to African Countries: US$ 43bn.  Trade-related adjustment accounts for US$ 15.1bn, 35% share on total AfT received, however a trade-related interpretation of the above WTO category is challenging (proxy used is General Budget Support of CRS of OECD, very, very broad).  Economic infrastructure accounts for roughly over US$ 14.1bn, share of approx. 33% of total AfT received. Up-grade and maintenance of infrastructure is a priority concern for African LDCs (although some infrastructure projects accounted in the WTO category may not be strictly linked to trade issues, however good proxy).

11 AfT Supply to African LDCs:  Building productive capacities accounted for a total amount of roughly US$ 12.9bn with a share of 30% ( not surprisingly a large bulk of such projects are related to the agricultural sector).  Trade policy & regulations programs, such as training and trade facilitation account for a negligible amount of US$ 1bn (trade facilitation, training, policy reform support, etc).  Building productive capacities accounted for a total amount of roughly US$ 12.9bn with a share of 30% ( not surprisingly a large bulk of such projects are related to the agricultural sector).  Trade policy & regulations programs, such as training and trade facilitation account for a negligible amount of US$ 1bn (trade facilitation, training, policy reform support, etc).

12 AfT Supply to African LDCs: Issues  Disparities in AfT per capita for African countries are huge (range for the period goes from US$ 42 of Sao Tome & Principe down to US$ 0.5 of Somalia).  Volatility of AfT flows at the country level is also a matter of concern in terms of aid effectiveness (although some countries show more stable flows, SD is high for the large majority of African LDCs).  Disparities in AfT per capita for African countries are huge (range for the period goes from US$ 42 of Sao Tome & Principe down to US$ 0.5 of Somalia).  Volatility of AfT flows at the country level is also a matter of concern in terms of aid effectiveness (although some countries show more stable flows, SD is high for the large majority of African LDCs).

13 AfT: The demand side The paper analyzes a few macro indicators as proposed by the WTO Task Force on AfT:  Logistics performance Index (WB)  Trading Across Borders (WB/IFC)  World Trade Indicators (WB)  African Competitiveness Report (WEF) The paper analyzes a few macro indicators as proposed by the WTO Task Force on AfT:  Logistics performance Index (WB)  Trading Across Borders (WB/IFC)  World Trade Indicators (WB)  African Competitiveness Report (WEF)

14 The demand side of AfT: LPI (1) LPI sub-indexesNo of countries Customs9 Infrastructure20 International Shipment3 Logistics Competence8 Tracking & Tracing9 Domestic Logistics Costs1 Timeliness0 Worst performances by LPI Sub-Indexes: Source: World Bank (2008)

15 The demand side of AfT: LPI at the RECs level (2) CEMAC ECOWAS COMESA SADC RECInt. LPICustomsInfrastructure UMA Sub-Saharan Africa Source: World Bank (2008)

16 The demand side of AfT: Export Concentration Index (3) 5 years may not allow to make trend considerations but intuitively you can see that African countries are not moving towards diversification

17 Does supply meet demand?: quintile ranks (1) Quintile Ranking based on a selection of macro indicators as proposed by WTO (2008) Worst performers: 1 CAR 2 Somalia 3 Niger 4 Sierra Leone 5 Rwanda 6 Guinea-Bissau 7 Eritrea

18 Does supply meet demand? AfT to GDP ratio (2) Among the group of countries receiving less AfT as a ratio to GDP as per regression line: Somalia, Democratic Republic of Congo, Zimbabwe, Eritrea, Chad, Sudan, etc.

19 Does supply meet demand?: AfT per capita (3) Correlation is negative and close to zero, suggesting a very weak relation between supply in per capita terms and potential demand

20 Conclusion  ODA-shifting from non-AfT to AfT not obvious.  Non-LDCs have not been discriminated in favour of LDCs.  AfT to non-LDCs grown at faster rate than that to LDCs.  There is evidence of AfT volatility.  There is no apparent rational criteria for AfT allocation among countries.  Countries that are most deserving do not necessarily receive the most.  ODA-shifting from non-AfT to AfT not obvious.  Non-LDCs have not been discriminated in favour of LDCs.  AfT to non-LDCs grown at faster rate than that to LDCs.  There is evidence of AfT volatility.  There is no apparent rational criteria for AfT allocation among countries.  Countries that are most deserving do not necessarily receive the most.

21 Some issues with monitoring  Proxies for AfT WTO categories need further re-thinking and development to better address the reality of AfT flows (better accountability, better management of flows, etc).  More country and regional level case studies and microeconomic analyses on projects and programs are needed to complement macro data and contribute to better evaluations (link to country’s PRSPs).  AfT funds are only a part of the funds(maybe the most concessional) that reach Africa, so it must fit into broader considerations.  Proxies for AfT WTO categories need further re-thinking and development to better address the reality of AfT flows (better accountability, better management of flows, etc).  More country and regional level case studies and microeconomic analyses on projects and programs are needed to complement macro data and contribute to better evaluations (link to country’s PRSPs).  AfT funds are only a part of the funds(maybe the most concessional) that reach Africa, so it must fit into broader considerations.

22 Practical issues for discussion 1.What problems are countries and RECs facing in attracting AfT resources? 2.As we enter the 2 nd Global Review process, what priority issues do African countries and RECs see as critical for them to benefit from AfT implementation? 3.What role(s) do African countries and RECs see for African regional organisations to help them address problems that limit their ability to attract AfT resources to match their demand? 1.What problems are countries and RECs facing in attracting AfT resources? 2.As we enter the 2 nd Global Review process, what priority issues do African countries and RECs see as critical for them to benefit from AfT implementation? 3.What role(s) do African countries and RECs see for African regional organisations to help them address problems that limit their ability to attract AfT resources to match their demand?


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