1. Massimiliano Riva UNDP Bratislava Regional Center 18 November, 2008 Trade and Human Development Trade facilitation in Central Asia* *Based on the findings of Richard Pomfret feasibility study on trade facilitation in Central Asia commissioned by UNDP in 2008

2. TRADE FACILITATION … traditionally defined as the simplification and harmonization of international trade procedures, including the activities, practices… required for the movement of goods in international trade… Poverty reduction and human development focus Reduce the “costs of exporting and importing goods” for small and micro entrepreneurs, farmers and associations of farmers… inclusive access to markets

3. SOME ASSUMPTIONS Recognize the continuity of trade as being not just something that happens at the national border The gains from trade arise from specialization in response to price signals and market information There are risks involved with specialization, there is a need to sensitize to the mechanisms for risk management and develop appropriate insurance markets

4. impediments to trade We can divide impediments to trade into 5 components, from central to local: 1.Trade policy 2.Transport infrastructure 3.Logistic performance 4.Administrative delays and high trade costs 5.Information and institutional constraints on identifying market opportunities

5. 1. TRADE POLICY Nearly all countries in the region have fairly liberal external trade policies, and a high level of trade/GDP Ratio. Kyrgyzstan is a WTO member and all other countries, except Turkmenistan, had applied to the WTO

6. Uncertainty over tariff levels, use of quantitative restrictions and other barriers has been declining. This trend is expected to continue in the process of WTO accession. The proliferation of permissions / different treatment is still a problem in Central Asia. Transit arrangements continue to be a serious problem, but there are commitment to free transit, and use of TIR is increasing. 1. TRADE POLICY

7. Afghanistan Turkmenistan Russia Kazakhstan Tajikistan Uzbekistan Pakistan Kyrgyzstan Ukraine Moldova Turkey Armenia Belarus Georgia Azerbaijan Iran UES CIS EAEC ECO GUAM 1. TRADE POLICY: A SPAGHETTI BOWL of AGREEMENTS … SPECA CAREC SCO Are they all implemented and respected?

8. CountryCapitalDistance (km) KazakhstanAstana2800 KyrgyzstanBishkek2300 TajikistanDushanbe1700 TurkmenistanAshgabat1100 UzbekistanTashkent1900 ChadN’djamena 1200 NigerNiamey 900 2. TRANSPORT INFRASTRUCTURE The distance to the seaports in the Arabian Sea and the Persian Gulf is between 2,000 - 3,400 km, 3,000 to the Black Sea, and to the EU about 4,000 km.

9. The spatial continuity of trade costs is recognized in the recent adoption of a corridors approach to trade facilitation by BOMCA, CAREC and EurAsEc Tashkent-Volgograd-Europe corridor

10. 3. LOGISTIC PERFORMANCE CountryLPICustomsInfrastructureInternational Shipments Logistic competence Tracking & tracing Domestic logistics costs Timeliness Singapore 4.193.94.274.044.214.252.74.53 United States 3.843.524.073.583.854.012.24.11 Czech Republic 3.132.9533.0633.273.43.56 Russian Federation 2.371.942.232.482.462.172.42.94 Azerbaijan 2.292.2322.5022.382.882.63 Kyrgyz Republic 2.352.22.062.35 2.382.82.76 Uzbekistan 2.161.9422.072.152.082.912.73 Kazakhstan 2.121.911.862.12.052.192.812.65 Tajikistan 1.931.91221.91.672.332.11 The Logistics Performance Index is based on a survey of operators (freight forwarders and express carriers), providing feedback on the “friendliness” of the countries where they operate/ trade.

11. 4. Administrative delays (and high trade costs) SOURCE WB BDI 2009 Documents for export (number) Time for export (days) Cost to export (US$ per container) Documents for import (number) Time for import (days) Cost to import (US$ per container) Singapore 4545643439 United States 46990551245 Hong Kong, China 4662545633 Thailand 414625313795 Georgia 81213807141340 Azerbaijan 948307514563420 Kyrgyz Republic 1364300013753250 Kazakhstan 1189300513763055 Russian Federation 836215013362150 Morocco 71470010181000 Uzbekistan 7803100111044600 Tajikistan 1082315010834550

12. 5. Information and institutional constraints Information and institutional constraints on producers identifying the best market opportunities and lack of knowledge of potential and existing value chains; these grassroots problems are especially severe for farmers or other small and medium-sized enterprises There are pockets of subsistence where trade has almost disappeared are in a vicious circle of no trade - low incomes – no trade. This is not necessarily international trade, but trade with the next province or market town.

13. SUMMARY: HIGH TRADE COSTS … trade is good for growth, and at the local level integrating producers and consumers into wider markets These links are feeble in Central Asia Still weak market mechanisms Unnecessary high costs of doing trade Uneasy geographical position

14. Costs include delays and impede the export of perishable goods (e.g. fruits). Uncertain delivery force buyers to hold inventories and limit the establishment of supply chains. A day’s delay in transport adds on average 0.8% to the value of a manufactured good, equivalent to a 16% tariff Behind-the-border trade costs are especially onerous to geographically dispersed sectors of the economy, such as agriculture. Reducing these costs will be pro-poor because it will benefit farmers and small enterprises SUMMARY: HIGH TRADE COSTS

15. SUMMARY: CONCENTRATION AND PRIMARY COMMODITIES Central Asian became linked to the global economy, pursuing comparative advantage in a few natural resources Trade is below its potential and the returns to integration (in terms of higher living standards) are disappointing The suboptimal level of trade and the concentration on primary products are inter-related high trade costs discourage trade in manufactures or processed foods, more than they discourage export of oil, gas, minerals, cotton or grains.

16. What can be Done? (1) Facilitate access to markets - promotion of behind the-border trade facilitation, including -rural infrastructure and markets -accessible and affordable business services -guarantee fair access to inputs Promotion of broader trade facilitation efforts -Reduced administrative barriers: simplification and special exceptions guaranteed to SMEs and individual entrepreneurs -public administration efficiency (e.g. customs) -regional integration and reduced export costs

17. Identify the principal obstacles to trade for individual producers and small and medium-sized enterprises outside the main cities. Encouraging producers to think beyond their current selling channels What can be Done? (2) Mainstream trade facilitation in existing public Infrastructure and business support programmes and donor interventions Set up alliances for business and export promotion/facilitation at the local level by strengthening existing institutions (e.g. chambers of commerce, associations, local authorities etc)

18. THANK YOU massimiliano.riva@undp.org http://europeandcis.undp.org/poverty/trade/