COMESA What kind of Technical Assistance do the Small Developing Countries Need? Presented at the International Seminar on Developing Countries and Services.

COMESA

What kind of Technical Assistance do the Small Developing Countries Need?

Presented at the International Seminar on

Developing Countries and Services Negotiations Indian Council for Research on International Economic Relations (ICRIER)

6-7 June 2006Delhi , India

Chawe [email protected] COMESA Secretariat

Lusaka - Zambia

1993 Treaty Establishing

COMESA Signed

1958 &1960 - Meetings of independent African States

agreed to promote economic co-operation amongst

themselves

1981 Treaty Establishing the PTA

Signed

1982 PTA Treaty Ratified

Oct 2000 Elimination of Internal Duties

2004 Common External Tariff

1994 COMESA Treaty Ratified

1965 - UNECA ministerial meeting in Lusaka recommended creation

of Economic Community of Eastern and Southern African

States.

1960 1970 1980 1990 2000

PTA / COMESA Timeline

Membership

Angola, Burundi, Comoros ,DR Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe

Rationale for Regional Integration

• Development objective is to reduce poverty and improve the population’s quality of life.

• Achieved through economic growth.• Economic growth depends to a large extent on

foreign investment• Attracting investment depends in part on:-

– larger markets;– reduced costs and improved competitiveness;– predictable business operating framework; &– a stable and peaceful environment.

Growth in Services

• Traditionally exports of services by developing countries have mainly focused on tourism, transport and the movement of natural persons

• During the last decade other sectors have grown increasingly in importance .

• Information technology and the so-called ‘back office’ or ‘out-sourcing’ services for example book-keeping, compilation of data and call centres are sectors that have shown rapid increase

• Other important export sectors are professional services, construction, educational, audio-visual and health care services

• However services related to the physical movement of persons is a slowly growing sector in many countries

Trade in Services by region: Asia

• Asia is the region most successful in benefiting from trade in services , developments have led to huge exports, strong national development and service companies that are world leaders

• The success in Asia is largely based on exports• At the same time several countries have many

obstacles to market access in their own markets, which increases both prices and production costs

Trade in Services by region:sub-Saharan Africa

• Asia is the winner and on the other had sub-Saharan Africa ( with the exception of South Africa) has had the weakest development

• The region participates to a very small extent in global trade in services and the inflow of FDI is smaller than any other region and affects only a small part of the population

• Liberalization of trade in services does not often lead to the expected inflow of FDI or to an increase in competition

Trade in Services : LDCs and Small Developing countries

•every LDC and small developing country has on average exports in 30 different services sectors usually construction, transport, business and professional services•There is more trade in services than trade in goods between LDCs and small developing countries•This is largely because the commodities trade is concentrated around unilateral GSP programmes provide by the Quad: US, EC, Canada and Japan•Increases in trade in services has also helped several LDCs and small developing countries to reduce poverty•Tourist services seem to one way for LDCs and small developing countries to increase their participation in the world economy

Challenges in trade in Services

•trade in services is subject to greater protection than trade in goods•Developed countries are more restrictive than developing countries where liberalisation is concerned•It seems to be generally the case that economies with fewer trade barriers in the services sector have a higher GNP per capita•In the short term most developing countries can make larger welfare gains by liberalising their own services sectors than by trying to increase external market access•This is because of the positive effect that cheaper and efficient services have on the production of goods and other services

Service Sector Performance requirements

• Dependent on prevailing conditions in individual countries

• Increase in trade and liberalization is highly dependent on countries having effective legislation that guarantees competition, alleviates adjustment costs and ensures that the gains reach the entire population

• sound regulatory framework • right to regulate• meet national policy objectives • Incentives for effective performance

What kind of Technical Assistance (TA) do LDCs and small developing

countries need ?

Objective No 1National Assessment of trade in services

in order to re-position the role of services in national economies

Sectoral studies: state of liberalisation, market access conditions ( in all modes of supply), domestic regulation( regulatory capacity and transparency issues), prices and performance indicators, quality and access issues, investment and employment

• This assessment work should be developing country appropriate and based on previous work undertaken in other developing countries : for example cross-pollination between Asia, Africa and South America

• must be undertaken by national services specialists themselves in so doing building National Services Analytical Capacity

Technical Assistance Needed contd.

Objective No 2Development of a cadre of National

Services Specialists at five levels :specialised national training courses for the following groups of persons to cover among others the role of services in national economies , economic theory of trade in services, the classification of services , trade in services and the multilateral trading system, bilateral and regional frameworks for trade in services , domestic regulation of services, measuring trade in services ( exports, performance, quality and access)

• Level 1: services specialists in the civil service/public sector : specialised national training courses for civil servants not only in trade and legal ministries but in sectoral ministries. Developing countries should be encouraged to have a Department of Services or Ministry of Services

( communications, energy, transport ), in particular cared of Commercial Diplomats • Level 2 : services specialists in regulatory bodies: specialised training for technical staff in all regulatory

bodies in the theory and economics of regulating services • Level 3 : private sector services specialists: specialised training for private sector operators• Level 4: academia and researchers • Level 5: development of appropriate curriculum for under-graduate and post-graduate courses in

Economics, Law, Development Studies, International Relations, ICT Courses

Technical Assistance Needed contd.

Objective No 3Inclusion of Services in National

Economic Policies • Development of NATIONAL SERVICES

POLICIES STRATEGIES as a section of NATIONAL ECONOMIC PLANS and should be encouraged actively to be distinctively included in Poverty Reduction Strategy Papers ( PRSPs), DTIS, National and Regional Indicative Programs , Trade Policy Reviews

Technical Assistance Needed contd.

Objective No 4 Locking in Services Reforms • National Level: development of supporting legislative and

regulatory framework to LOCK-IN autonomous services and future reforms

• Regional Level: vast majority of LDCs and small developing countries are members of Regional Economic Communities (RECs) and the development of regional supporting legislative regulatory frameworks to LOCK IN services reforms

• Multilateral Level: after locking in at the national level and regional levels then locking at the MTS can be eased and more coherent given that appropriate sequencing has taken place

Technical Assistance Needed contd.

Objective No 5 Mode Specific Assistance • Mode 1: ICT Reform• Mode 2: Recognition and Accreditation• Mode 3: performance related training,

systems related training and access to information channels for set up

• Mode 4 : specialist as opposed to generalist training, recognition, certification, registration, accreditation and revitalisation of vocational training

Technical Assistance Needed contd.

Objective No 6 Participation in International/ UN

Services related Bodies and Standards Setting Bodies

• Targeted resources towards the increased participation of LDCs and small developing countries in international, UN services and standard setting bodies: taking the form of active recruitment of personnel from developing countries through increased quotas, allocation of developing country representatives in governing bodies eg ITU, IPU, World Tourism Organisation, IATA etc

Technical Assistance Needed contd.

Objective No 7

Special Assistance to SMEs/MSMEs• Development of appropriate and

localised training packages for the delivery and if possible trade of services in SMEs and MSMEs given the fact that the majority of corporate entities in LDCs and small developing countries are small

Technical Assistance Needed contd.

Objective No 8 Advocacy for Services

• Development of appropriate and localised advocacy material for trade and delivery of services

Complimentary Financial Assistance

Objective No 9Services Development

Budgets/Funds: • IFIs, Multilateral Development Banks, Regional Development Banks,

Investment Banks need to allocate specific investment and lending resources ( both supply and demand driven) for the concerted development of the services sectors both to public , private and public-private operators in developing countries, including the establishment of regulatory authorities . At the moment there is over-focus on trade and export finance for commodities. Major funds should be actively increased and developed by the IBRD, European Investment Bank ( EIB), International Finance Corporation in particular those of the developing regions

• This should be complimented by resources on-lent and allocated by continental banks such as African Development Bank (AfDB) , Asean Development Bank, Inter-American Development Bank .

• The focus being SMEs and MSMEs financing

COMESA Experience

• In COMESA we have received resources from EDF and DfID to undertake TA Objective No 1 in collaboration with UNCTAD, World Bank and other specialised agencies

COMESA Regional Work on Services

• Comprehensive assessment of the state of trade in services in COMESA ( excl Libya as became

member after programme launched) countries Develop a regional programme on

integrating services to Assist in GATS negotiations to facilitate EPA negotiations with the

EU

Regional Assessment Work Programme

National assessments in Outlining

• GATS status

• extent of liberalisation

• policy environment

• regulatory environment

• sector performance and

• GATS templates

GATS Templates

• Collation of national regulations in all sectors

• conversion of all national regulations in all sectors into GATS-type language

Four modes of Supply Market Access Limitations National Treatment Limitations Domestic Regulation

Sectoral Assessment

• Extent of liberalisation factors behind private entry and how open sectors are, where the restrictions are, why restrictions are there;

• Policy environment : competition and entry requirements

• Regulatory environment : characteristics of the regulator

• Market Structure: number of firms, market share, ownership patterns

• Performance indicators: price and quality measures and employment and investment data

Sectors being covered • Financial( Banking, Insurance and Securities)• Communications ( Postal and Courier, Audio-Visual and

Telecommunications,)• Transport( Road, Rail, Inland Waterways, Maritime, Air

and Services related to all modes of transport),• Construction and related engineering,• Business services( Other Business, Computer Related

and Professional Services),• Tourism,• Health,• Education• Energy • Distribution • Mode IV ( horizontal)

Capacity Building under the Regional Assessment

• All countries have members of their respective national working groups on services who are government experts , experts from regulatory bodies and experts from industry associations who have been trained in the development of the National GATS Templates and Sectoral Assessments

• All in all in each country their are four experts working on the National GATS Templates and 10 experts working on the Sectoral Assessments

• A total of 14 experts per country working on assessing trade in services - regional cadre of 252

Way forward

• To enable a comprehensive and meaningful programme we need more resources in the other TA objectives