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
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1. Introduction
2. Overview of Aid for Trade (AfT) in Bangladesh
3. Revisiting AfT in Bangladesh
4. Recommendation
Contents…
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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
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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
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(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:
OVERVIEW OF AfT IN BD
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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 :
OVERVIEW OF AfT IN BD
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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)
OVERVIEW OF AfT IN BD
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Figure: Total export vis-à-vis AfT in Bangladesh (2002 – 2011)
Source: Export Promotion Bureau of Bangladesh and OECD CRS
OVERVIEW OF AfT IN BD
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Figure: Export growth, degree of openness, AfT growth in Bangladesh
Source: Export Promotion Bureau, Bangladesh Bank and OECD CRS
OVERVIEW OF AfT IN BD
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Figure: Commitment vis-à-vis disbursement of AfT (2002 - 2011)
Source: OECD Creditor Reporting System Database
OVERVIEW OF AfT IN BD
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Figure: Global AfT disbursement vis-à-vis Bangladesh (constant 2010 prices)
Source: OECD Creditor Reporting System Database
OVERVIEW OF AfT IN BD
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Figure: Share of broader AfT categories in total AfT disbursement in Bangladesh (in %)
Source: OECD Creditor Reporting System Database
OVERVIEW OF AfT IN BD
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Figure: Commitment & disbursement in trade policies & regulations by DAC countries to Bangladesh in constant
prices (2011 USD millions)
Source: OECD Creditor Reporting System Database
OVERVIEW OF AfT IN BD
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Figure: AfT disbursement to Bangladesh: share of grant, loan and equity investment (2002-05 and 2006-11)
Source: OECD Creditor Reporting System Database
OVERVIEW OF AfT IN BD
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Source: Bangladesh Economic Review, Ministry of Finance, GOB
Figure: Sectoral Composition of Bangladesh Economy (FY1973 – FY2012)
REVISITING AfT in BD
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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)
REVISITING AfT in BD
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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
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• 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
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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
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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