revisiting aid for trade initiative in bangladesh...revisiting aid for trade initiative in...

Revisiting Aid for Trade Initiative in Bangladesh

Tapas Kumar Paul Department of Economics

Independent University, Bangladesh

UNESCAP Regional Expert Dialogue on Aid for Trade Bangkok; 18 November, 2013

Tapas Paul Department of Economics 2

1. Introduction

2. Overview of Aid for Trade (AfT) in Bangladesh

3. Revisiting AfT in Bangladesh

4. Recommendation

Contents…


INTRODUCTION


Targeting aid to overcome "supply side" constraints

The purpose of AfT is to help developing countries and LDCs to

build infrastructure, stimulate trade, develop trade strategies,

negotiate more effectively and implement outcomes

AfT is a part of overall development aid (ODA) – in a form of

grants and concessional loans targeted at trade-related programmes

and projects

INTRODUCTION


Due to supply side constraints, the developing country, like

Bangladesh, is unable to materialize the benefit of preferential trade

Technical and financial supports are being provided by the

development partners to enhance trade performance by the LDCs

Four Global Reviews (2007, 2009, 2011 & 2013) have been

conducted by the WTO and OECD for the monitoring and

evaluation of AfT

An in-depth independent effectiveness analysis of the AfT in

Bangladesh is required

INTRODUCTION


OVERVIEW OF AfT IN BD


(i) Weak infrastructure

(ii) Lack of good governance

(iii) Inefficient trade facilitation measures

(iv) Limited support services

(v) Limited access to capital/credit

(vi) Low research and innovation capacity

(vii) Poor human resources and rigid labour regulations

Supply side constraints faced by Bangladesh:



The Aid for Trade Task Force makes the following distinction

in their recommendations in 27 July 2006:

Trade policy and regulation

Trade development

Trade related infrastructure

Building productive capacity

Trade related adjustment

Other trade related needs

Main Components of Aid for Trade :



Year and/or Members Commitments

2001-2004 annual average of EUR 2.0 billion 2004 annual average of EUR 2.4 billion EU Member States EUR 2 billion per year by 2010

USA USD 2.7 billion a year by 2010 for: Physical infrastructure and Trade facilitation

Japan USD 10 billion over the next 3 years for: Trade, Production and Distribution infrastructure

Table: Donors' Commitments on Aid for Trade up to and During Hong Kong Ministerial (2005)



Figure: Total export vis-à-vis AfT in Bangladesh (2002 – 2011)

Source: Export Promotion Bureau of Bangladesh and OECD CRS



Figure: Export growth, degree of openness, AfT growth in Bangladesh

Source: Export Promotion Bureau, Bangladesh Bank and OECD CRS



Figure: Commitment vis-à-vis disbursement of AfT (2002 - 2011)

Source: OECD Creditor Reporting System Database



Figure: Global AfT disbursement vis-à-vis Bangladesh (constant 2010 prices)




Figure: Share of broader AfT categories in total AfT disbursement in Bangladesh (in %)




Figure: Commitment & disbursement in trade policies & regulations by DAC countries to Bangladesh in constant

prices (2011 USD millions)




Figure: AfT disbursement to Bangladesh: share of grant, loan and equity investment (2002-05 and 2006-11)




REVISITING AfT in BD


Source: Bangladesh Economic Review, Ministry of Finance, GOB

Figure: Sectoral Composition of Bangladesh Economy (FY1973 – FY2012)



Trade activity in the last few decades has increased significantly for

Bangladesh economy

The country’s export concentrated (over 80%) only one item; RMG

The share of service sector has remained unchanged to the national

economy after independence (trade off between agri. & industry)



145 18

58 100

21 14 18 25

188 7 22 32

13 22

289 112

1132

0 500 1000

Pemberton Mill, 1860Washburn “A” Mill, 1878

Grover Shoe Factory disaster, 1905Triangle Shirtwaist Factory fire, 1911The Boston Molasses disaster, 1919

Dust explosion, 1979MESIT factory collapse, 1984

Hamlet chicken processing plant fire, 1991Kader Toy Factory fire, 1993

Haysville KN grain elevator explosion, 1998Enschede fireworks disaster, 2000

Qinghe Special Steel Corporation disaster, 2007Georgia sugar refinery explosion, 2008

Istanbul fireworks explosion, 2008Fire at the Ali Enterprises garment factory, 2012

Dhaka Tazreen Fashions fire, 2012Savar building collapse, 2013

Number of People

Figure: Number of Deaths in Major Disasters in the Manufacturing Sector (various countries)

REVISITING AfT IN BD: A CAUTIONARY NOTE


• Bangladesh government is moving to improve factory safety in the garment industry

• A fund of £15m supported by the ILO, UK & Dutch governments is on the pipeline, and others

REVISITING AfT IN BD: A CAUTIONARY NOTE


AfT had no impact at the macro level in Bangladesh however, it has

contributed to micro level (RMG). Although exports have increased

since the initiative took off (Khatun, 2013)

AfT funds be instead used for the workers’ safety and that the government

make a separate AfT strategy to get more funds (Rahman, 2013)

The most important factor to facilitate trade is policy. Trade is a policy

driven variable. If policies are efficient, it will respond accordingly

(Kathuria, 2013)

Inclusion of some AfT projects for development of social infrastructure

would be a valuable effort for Bangladesh (Bhattacharya, 2013)

REVISITING AfT IN BD: LITERATURE


RECOMMENDATION


RECOMMENDATION

Enhancing goods flow is the main target of the AfT and services are

rarely targeted. Movement of natural persons under the Mode-4

appeared to be very important for Bangladesh

Formation of an AfT Cell in Bangladesh

Effectiveness analysis of the AfT in Bangladesh is required

Policy coordination among government agencies in Bangladesh


Thank You

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