Mr. Mahmoud Mohieldin, Managing Director of the World Bank,
Mr. Pascal Lamy, Director-General of the World Trade Organization,
Heads of UN and other related Agencies here in Geneva,
Ambassador Acharya, chair of the Global Bureau of LDCs
Excellencies, Ladies and Gentlemen,
It is indeed an honour and a privilege for me to be opening this very important meeting and I thank the World Bank for choosing a subject that is so relevant and crucial to one of my office’s main constituencies – the LDCs. I thank them also for gathering all these esteemed experts and practitioners in this room to exchange views on the Aid for Trade agenda and provide concrete guidance on the way forward which we can then take into account as we prepare for the Fourth UN Conference on the LDCs to be held on 9-13 May in Istanbul, Turkey.
Allow me to express my sincere thanks to Pascal Lamy and to the WTO for hosting us today and for the excellent organization of this meeting.
LDCs comprise countries at the bottom of the economic ladder with the lowest human development indicators including education and health. They are economically most vulnerable. Kept in the poverty trap, they have remained severely weak in many spheres including in physical infrastructure, institutional and regulatory frameworks, information and human resources, among others. As a result, they are unable to compete effectively in the global market and take full advantage of the benefits that international trade could bring.
Excellencies, ladies and gentlemen,
Despite all these persistent challenges, the good news is that the LDCs have remained resilient – they have not given up. But more importantly, the international community has not given up on them. Today, we are here to discuss how best to address and remedy the low level of integration and participation into the world trading system of LDCs.
We acknowledge that various preferential trading arrangements – the Generalized System of Preferences (GSP), Everything But Arms Initiative (EBA), African Growth and OpportunityAct (AGOA), among others, had in some ways improved market access for developing and least developed countries.
Yet, despite these market access preferences, LDCs’ participation in global trade has remained very low at less than 1 per cent. Why is this so? Many LDCs continue to be burdened by high transport costs, cumbersome and slow export processing procedures, poor product standards, absence or unsupportive policies and regulations on doing business. Thus, they continue to suffer from low productivity and have remained uncompetitive.
This is where Aid-for-Trade becomes particularly crucial and a necessity for LDCs – they need financial and technical assistance, institutional support and capacity-building to address their supply-side capacity and trade-related infrastructure constraints. This will help them be more competitive, diversify their economies, lessen their vulnerabilities and boost their productive and absorptive capacities.
Excellencies, Ladies and Gentlemen,
We are all aware that the success of the Aid for Trade initiative depends as much on the flow of funds from donors as on the effective utilization of these funds at the country level.
We are encouraged by the fact that Aid for Trade is increasingly forming an important part in donor programmes. The flow of Aid-for-Trade resources has increased year‑on‑year since 2005, with resources growing annually by approximately 10 per cent. The global financial envelope for Aid for Trade reached US$ 25.4 billion in 2007 and Aid for Trade commitments reached US$ 41.7 billion in 2008 - an increase of US$ 16 billion from the 2002-05 baseline. Moreover, despite the global economic downturn, we have the donors’ affirmation to respect their Aid-for-Trade funding commitments. These are all very positive and very encouraging indeed.
Excellencies, Ladies and Gentlemen,
The operationalization and successful implementation of Aid-for-Trade rests in the cooperation and close coordination between LDCs and their development partners, as well as with regional economic communities. But the need for additional, adequate, predictable, sustainable and effective financing, which should be made available without conditionality and in grant form to LDCs, could not be overly emphasized. Any increase in Aid-for-Trade funding should not be at the expense of other categories of development assistance. As trade is an important source of development finance and ODA is one other component, these two should be leveraged together.
In this regard, I welcome suggestions made in various other fora for an “Aid-for-Trade Strategic Fund” and express hope that the G-20 and developing countries with the capacity to do so heed such calls and make concrete steps towards that direction.
On this note, allow me to reiterate some key considerations for any Aid-for-Trade package:
First, any Aid-for-Trade package must come with the view to improving the productive capacities of LDCs. In this regard, I would like to highlight the need to target these three key priority areas:
- improving LDCs’ export supply capacity, which means making the agriculture, manufacturing and services sectors more diversified and competitive;
- improving trade-related infrastructure, both hard (i.e., physical infrastructure) and soft (laws, policies and regulations) to facilitate trade. This includes improvements in transport and communications networks to ensure connectivity into the global value chain, as well as simplification of customs and border procedures; and
- building capacity to overcome non-tariff barriers, including compliance to standards, technical and sanitary requirements and meeting certification and conformance requirements.
Second, it is important that LDC governments take full ownership of the Aid-for-Trade related projects and that trade is mainstreamed into national development and poverty reduction strategies.
I should not fail to mention in this regard the role of the Enhanced Integrated Framework (EIF). For LDCs in particular, the EIF process not only assists LDCs in mainstreaming trade into their national development strategies but also provides LDCs with the platform for leveraging additional funding from their development partners. This allows them to translate their trade-related needs into funded and deliverable projects. In addition to trade-related capacity-building and trade facilitation projects, other suggested priorities for EIF-related resources should be for projects supporting technological development and diversification out of commodity dependence.
Third, I would like to highlight the importance of institution-building and the strengthening of regulatory framework in LDCs which empowers national leadership in the design and implementation of national development strategies. While this is mainly a responsibility for individual LDC governments, the development partners can play a role through capacity-building and transfer of knowledge and expertise on institution-building and regulatory reforms required for an effective economic and developmental governance.
Let me now turn to my fourth point. I could not but stress the importance of building strong partnerships between governments, the private sector, and the donor community to ensure the sustainability of and long-term benefits from Aid-for-Trade projects. Partnerships at the regional level through regional economic communities are also now becoming more the order of the day. South-South cooperation is also increasingly playing an important role as trade among developing countries are on dramatic increase.
There are good examples of productive partnerships with the private sector at the global level and at the regional level through RECs, such as trans-regional highway and common border crossings and customs arrangements, regional telecommunications and energy grid, among others. In addition, at the regional level, Aid-for-Trade assistance are channelled to harmonization of policies, standardization, trade negotiation capacity and trade policy formulation. These types of partnerships, most of which target trade facilitation projects, should only be strengthened and multiplied.
Lastly, one should not forget the aspect of evaluation and monitoring of Aid-for-Trade flows. We need efficient monitoring mechanism to ensure that the overall objective of Aid-for-Trade are met and that the projects indeed respond to the needs of the LDCs. I wish to highlight that monitoring and evaluation should be complemented and reinforced by an active review process and provide an environment for dialogue, knowledge-sharing and the exchange of best practices.
Excellencies, Friends, Ladies and Gentlemen,
The themes you selected, including post-economic crisis challenges, priorities in the aid for trade agenda, roles of the government, the private sector and industrial policy in trade expansion projects are all indeed very appropriate. I will follow today’s discussions with great interest as they will certainly be very useful inputs for the new Programme of Action that the Fourth LDC Conference will be adopting.
Let me leave you with these thoughts and I look forward to a very interesting and successful deliberations.
I thank you.