02 Jun 2010
"UNCTAD´s Initiatives on Aid for Trade"
Thank you for this opportunity to share some of the recent thinking of the United Nations Conference on Trade and Development on the aid- for-trade initiative.
If there is just one message I want to make this morning, it is that everything that UNCTAD does and stands for can be seen as providing aid to help trade. Our reason for being is to help develping countries to make the most of their trade, investment and development opportunities and to participate beneficially in the world economy. In fact, we are the focal point for the United Nations, for the integrated treatment of trade, development, finance and technology. We lead the network that aims to coordinate UN system-wide work on trade and trade-related productive capacities - helping support the UN´s efforts to have a coherent approach on trade, in its activities around the world.
In addition to this general work on trade and development, we have of course been involved more particularly, in the ´Aid for Trade initiative´ that we are discussing today. The UNCTAD Secretary General, Dr Supachai, opened the second Aid for Trade Global Review in 2009, and we helped developing countries, such as the ACP Group of States, in preparing their participation. We anticipate contributing to the third review.
So we are therefore very encouraged by the interest of the Senior Officials´ Steering Committee in our work. As I highlight some of our recent thinking and activities, I will also try to reflect on the five priorities endorsed earlier this year by APEC Senior Officials to guide the organization´s economic and technical cooperation. In UNCTAD´s experience, these priorities are profoundly interdependent, and they can be supported through trade and development - although this will not occur automatically. Hence the activities of institutions such as UNCTAD, APEC, or the ´Aid for Trade´ initiative have a role to play.
The latest OECD data show that the Aid for Trade initiative is starting to become a reality, after a somewhat slow start. We are told that donor commitments reached US$ 41.7 billion in 2008, with actual disbursements totalling just over half this amount. However questions remain about these figures. The definitions used are broad and so virtually all donor activities with a connection to trade are being lumped into this category. The mechanism to measure how individual pledges have been converted into individual disbursements is not clear -- the measurements quoted are based only on an aggregate annual average, comparing total pledges in one year against total disbursement two years later. This is probably one of the reasons why it may be difficult to measure the benefits produced by the AfT initiative.
The OECD data also shows that about 97% of the commitments were spent on productive capacity and infrastructure building. This is a positive trend as UNCTAD research has long been concerned about donor assistance and ODA being directed towards urgent social and humanitarian needs and away from the productive and economic investments essential for creating jobs and sustainable development. Most developing economies needed to undergo far-reaching structural transformation even before the compound crises of the last few years, and now the threat of a new debt crisis is making it all the more difficult for them to finance the new infrastructure, technologies, and economic diversification that would enable them to benefit more from trade.
As just a few examples of what can be done, UNCTAD research on new and renewable energy technologies and diversification into services, indicate ways in which AfT could help countries move away from fossil-fuel dependence and outdated methods of production and onto a ´greener´ development path. Other areas include bio-trade and sustainable agriculture. We recommend these not just because of their environmental benefits. They would also help support the APEC Senior Officials´ priority of promoting sustainable growth - because using renewable energy reduces fossil-fuel importing countries´ exposure to volatile commodity prices and exchange rates. It can also create opportunities for businesses and jobs, generating entirely new markets for the production and consumption of renewable-energy-related products. It can even help to address the APEC priority of human security - for example, by reducing the vulnerability of poor communities to climate-change-related environmental disasters.
As another concern, I note that the distribution of the AfT commitments made is still very patchy. Over 44% goes to the Asian region. This may benefit some APEC members, but members in Oceania receive practically no funding, with less than 1 % of the total going to that region between 2005 and 2008; and the Americas, where there are as well APEC members, received less than 2 %. UNCTAD´s focus is of course even broader than this, and we are concerned to see that the implementation of the AfT initiative has been very slow or lagging for Least Developed Countries, including those in Africa, where assistance is most needed. It took a very long time just to launch the Enhanced Integrated Framework for LDCs, through which UNCTAD works with the World Bank, WTO, UNDP and other agencies to help countries incorporate trade into their national development strategies. This initiative is a very small part of the overall programme, but it became fully operational only this year, and there are still few other concrete examples of AfT projects.
One notable exception is the North-South Corridor that has cut the costs of cross-border trade in sub-Saharan Africa. UNCTAD´s work on landlocked and least developed countries shows that poor infrastructure and lack of trade facilitation create major obstacles to trade. It would greatly support the spirit of AfT, and APEC´s own priorities, if more such initiatives could be rolled out. UNCTAD has developed expertise in these issues, including on the use of public-private partnerships with respect to ports and harbours, and other programmes to unlock obstacles to trade caused by high costs or inefficient processes. One example is our computerized system of customs and tax collection, or ASYCUDA, for short. In Afghanistan, to take just one of the many countries where the system has been introduced, customs collection rose four-to-fivefold, to the extent that it now contributes around 50% of the government´s total domestic revenues. The new system also saves time: customs procedures that used to take two-to-three days are now done in 15 minutes. This helps to boost trade, including for neighbouring countries whose vehicles enter Afghanistan in transit, en route to the port.
UNCTAD also has expertise in investment - an area we believe to be critical for boosting productive capacities and trade, and which deserves more attention in the aid-for-trade approach. Through our investment policy reviews, we help developing-country governments put in place a more ´enabling environment´ that can encourage the private sector. This can include attracting and benefiting more from foreign direct investment. Foreign investors can help create jobs, bring knowledge and technology, and access to global markets. Domestic investors are equally important, and we work with local entrepreneurs through our Empretec programme and other initiatives that are designed to boost linkages between small and medium enterprises and foreign affiliates. Beneficial linkages do not happen automatically, however, and whether they emerge or not can make a big difference to realizing the APEC priority of sustainable and inclusive development.
In other programmes, we help countries through the process of accession to the WTO, offering advice and analytical support on trade negotiations and training trade negotiators, in addition to our analytical work on trade policy and our efforts to help ensure that developing countries become more equal partners in multilateral trade processes. UNCTAD´s national services policy reviews, for example, help countries to develop infrastructure, including telecommunications; or to promote sectors, such as tourism, that can build jobs and boost growth. According to the OECD data, only 3 % of total AfT disbursements go to this kind of work, so UNCTAD´s work on this is clearly important.
So to sum up, what I am saying is that everything UNCTAD does and stands for is a de facto definition of aid-for-trade. We could therefore also help the international community in its efforts to make the AfT initiative work better. It is clear that the responsibility for improving things lies with both the supply and the demand sides of the initiative. From the donor side, take-up would be improved if developing countries had more information about what is available. From the recipient side, developing countries need to be more explicit about how AfT is related to their national strategies and policy goals, and to articulate their needs. Too few countries or regions have put forward strategic and long-term proposals that attract serious follow-up. UNCTAD, in its role as a forum for intergovernmental processes, as well as through its research and technical cooperation, could help to further this ´match-making´ process.
In saying this, I should emphasise that for UNCTAD, AfT must be a complement to the bilateral and multilateral aid process, and not a substitute. It is important to ascertain the extent to which actual new AfT projects have been funded, and through funds that are additional to ODA.
I am emphasising this point given the financial and economic crises that have hit the global economy in recent years, including traditional donor countries. UNCTAD research shows that ODA flows may take up to four years to recover from crises of these sorts, even if the impact is not felt immediately. Donor country policy-makers may be finding it harder to ´sell´ the argument for honouring AfT commitments just now, with public revenues falling and budget deficits looming. This is, however, exactly the time when AfT is needed most: The crisis has revealed, starkly, the systemic imbalances and development failures that were always there, so that far from justifying a retreat from AfT, the crisis highlights its necessity. This context does, of course, make it ever more important to ensure that funds are spent efficiently and effectively, with donor and recipient countries working in partnership. The United Nations - which stands as an independent and inclusive G-192 - can help to broker such a partnership.
I hope I have given you a flavour of the many ways in which UNCTAD is working to support trade and development. We will be working closely with the WTO and OECD in the global review of the Aid for Trade initiative. UNCTAD believes that the time has come for an assessment of the impact of the Aid for Trade initiative on economic growth and development. We would also of course be pleased to work closely with APEC in evolving its AfT strategy and implementation in order to help all APEC members become more beneficially - and inclusively - integrated into the global economy.