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AID FOR TRADE

Politecnico di Milano Scuola di Ingegneria Mi Ingegneria Gestionale – CO Aid for Trade Relatore: Tajoli Lucia Zhou Shujia 782441 Zhou Huikang 780653 Anno Accademico: 2013/2014

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STATISTICAL NOTES

FIGURE 2-1 NEW AID-FOR-TRADE PRIORITIES ... 7

FIGURE 2-2AID FOR TRADE FROM ODA BY INCOME GROUP ... 8

FIGURE 2-3AID FOR TRADE BY AREA FROM ODA(2011) ... 8

FIGURE 2-4GROWTH OF AID FOR TRADE BY AREA ... 9

FIGURE 2-5TOTAL AMOUNT OF ODAAID FROM 2002 TO 2011 ... 10

FIGURE 2-6TOTAL AMOUNT OF OOFAID FROM 2002 TO 2011 ... 11

FIGURE 3-1 TIME TO EXPORT AND IMPORT COMPARED TO LOW INCOME COUNTRIES AVERAGE IN 2005 AND 2011 ... 14

FIGURE 3-2AID FOR TRADE IN UGANDA BY TYPE (DISBURSEMENT) ... 17

FIGURE 3-3AID FOR TRADE IN UGANDA BY SECTOR,2011 ... 17

FIGURE 3-4 LOGISTICS PERFORMANCE OF UGANDA AND LOW INCOME COUNTRIES ... 19

FIGURE 3-5 EXPORT VALUE OF UGANDA IN 2005 AND 2008 ... 23

FIGURE 3-6 SHARES OF SECTORS OF UGANDA IN AVERAGE FROM 2005 TO 2008 ... 23

FIGURE 3-7 THE TREND OF AID FOR TRADE FROM 2005 TO 2008 ... 24

FIGURE 3-8ASSOCIATIONS PROVIDING TRADE SUPPORT SERVICES ... 24

FIGURE 3-9 OMPANIES RECEIVING TRADE SUPPORT SERVICES ... 24

FIGURE 4-1 COMMITMENTS AND DISBURSEMENT OF AID FOR TRADE FROM ODA ... 28

FIGURE 5-1TIME TO EXPORT ... 33

FIGURE 5-2DISTRIBUTION OF AID FOR TRADE TO LDCS ... 34

FIGURE 5-3 TOTAL AID RECEPTION BY SECTOR FROM ODA (OFFICIAL DEVELOPMENT ASSISTANCE) IN 2002 AND 2011 ... 35

FIGURE 5-4DIFFICULTIES TO CONNECT DEVELOPING COUNTRIES TO TRANSPORT AND LOGISTICS VALUE CHAINS ... 36

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FIGURE 5-5 THE VARIATION OF ECONOMIC INFRASTRUCTURE ... 37

FIGURE 5-6 THE VARIATION OF BUILDING PRODUCTIVE CAPACITY ... 38

FIGURE 5-7 DIFFICULTIES TO CONNECT DEVELOPING COUNTRIES TO TEXTILES AND APPAREL VALUE CHAINS ... 39

FIGURE 5-8THE VARIATION OF TRADE POLICIES AND REGULATIONS ... 40

FIGURE 5-9TAX ON INTERNATIONAL TRADE (% OF REVENUE) ... 42

FIGURE 5-10 HIGHEST FOOD IMPORT COUNTRIES AND LOWEST FOOD IMPORT COUNTRIES (%TOTAL MERCHANDISE IMPORT) ... 45

FIGURE 5-11AFT DISBURSEMENT IN US$ MILLION AT CONSTANT 2007 PRICES47 FIGURE 5-12AID FOR TRADE BY DONOR ... 48

FIGURE 5-13AID FOR TRADE BY DONORS AND CATEGORY ... 48

FIGURE 5-14 TOP 20 RECIPIENTS OF AID FOR TRADE IN 2009 , BY COMMITMENTS ... 49

FIGURE 6-1THE PROPORTION OF GRANTS AND LOANS IN TOTAL CATEGORIES 51 FIGURE 6-2 THE PROPORTION OF GRANTS AND LOANS BY INCOME GROUP IN 2011 ... 53

FIGURE 6-3 PROPORTION OF GRANTS AND LOANS IN BILATERAL AND MULTILATERAL DONORS ... 55

FIGURE 8-1 PARTICIPATION OF SELF-ASSESSMENT ... 65

FIGURE 8-2NEW AID FOR TRADE PRIORITIES ... 66

FIGURE 8-5 FACTORS DRIVING CHANGES IN LEAST DEVELOPED COUNTRIES’ STRATEGIES ... 68

FIGURE 8-6 EXPECTED CHANGES IN TOTAL AID-FOR-TRADE IN THE NEXT FIVE YEARS ... 69

FIGURE 8-7 MOST AND LEAST IMPORTANT DRIVERS OF CHANGE FOR BILATERAL DONORS ... 70

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FIGURE 8-8 MOST AND LEAST IMPORTANT DRIVERS OF CHANGE FOR

MULTILATERAL DONORS ... 71

TABLE 3-1: BASIC INDICATORS OF UGANDA ... 13

TABLE 3-2: TRADE INDICATORS OF UGANDA COMPARED BETWEEN 2005 AND

2011 ... 14

TABLE 5-1AID FOR TRADE,SECTOR ALLOCABLE AND TOTAL BILATERAL AND

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Dopo il Doha Round e la Conferenza Ministeriale avvenuta a Hong Kong, l’Aid for Trade ha segnato l’inizio di una nuova era dove essa è diventato più sistemazzato e più standarizzato. L’Aid for Trade è una associazione istituita da WTO per assistere i paesi di sviluppo a sbarazzare i ostacoli commerciali ed entrare il mercato internazionale commerciale. Al quel scopo menzionato, i paesi di donatore danno ai paesi di beneficiario il proprio aiuto che racchiude l’infrasturra economica, costruzione della capacità produttiva, le politiche e le norme comerciali ed il costo di aggiustamento al fine di alzare l’efficienza e l’efficacia di commercio ed aumentare la concorrenzialità internazionale. Dopo lo sviluppo di qualche anno, l’Aid for Trade sta crescendo stabilmente ed è già risultato in modo giusto. Nelle revisioni biennali riguardo all’Aid for Trade pubblicate da WTO, si prospetta che WTO fa l’attenzione all’Aid for Trade e la pianificazione per futuro.

Nel momento della globalizzazione economica e riviversi dalla crisi economica, un mercato piacevole internazionale conta lo stato dell’export ed import tra i tutti paesi e la diffusione della liberazione commerciale. Ad analizzare l’effetto dell’Aid for Trade per i paesi di sviluppo nella profita e sviluppo nel mercato commerciale, la tesina comprende chi partecipa l’Aid for Trade, che cosa si trasferisce nell’Aid for Trade, in che forma e in che tipo di trasferirsi e la tedenza del’Aid for Trade. L’infrasturra economica, la technologia, l’informazione e il management nei paesi di sviluppo sono ancora meno avanzati di quelli nei sviluppati. Anzi, l’effetto secondario apparisce dalla liberazione commerciale. Inoltre, i meno sviluppati paesi si comportano mediocremente dopo i sviluppati paesi hanno protetto l’industria nazionale. In quanto la vita di prodotto nei paesi di sviluuppo è più lunga, il prodotto è facilmente sostituito nell’ambiente più dinamico. Dunque, la soluzione, dalla vista del value chain, è abituarsi il proprio background di ogni specifici paesi invece di in modo che si trasferisce solo il fondo. Di conseguenza, analizziamo la situazione globale in questo momento e sequenziamo le priorità dei problemi ad essere migliorati dai paesi meno sviluppati e poi conosciamo la gravità dell’Aid for Trade e la tendenza di sviluppo.

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After the Doha Round and the Ministerial Conference held in Hong Kong, the Aid for Trade has started a new era where it becomes more systemized and more standardized. The Aid for Trade is an association instituted from WTO in order to assist the developing countries to clear the trading obstacles and to enter the international trading market. For the purpose mentioned above, the donor countries give the recipient countries the right aid that includes economic infrastructure, building productive capacity, trade policy and regulation, and adjustment cost in order to improve the efficiency and effectiveness of the trading and increase the international competitiveness. With the development for several years, the Aid for Trade is increasing stably and has turned out to be successful. In the biennale review regarding to the Aid for Trade published by WTO, it is foreseen that WTO draws the attention to the Aid for Trade and the future plan.

With the economic globalization and the survival from the economic crisis, a good international market depends on the export and import situation between the countries and the trading freedom spread. In order to analyze the effect of the Aid for Trade for the developing countries in the interest and development of the trading market, and which type of transfer and the trend of the Aid for Trade. The economic infrastructure, the technology, the information and the management in the developing countries are still less advanced than those in the developed countries. Even, the side effect appears from the trading liberalization. Furthermore, the less developed countries will perform normally after the developed countries have protected their national industries. Since the product life in the developing countries are longer, the product is much more easily substituted in the dynamic environment. Therefore, the solution, from the view of the value chain, should be adapted in the background of every specific countries instead of in the way only the fond is transferred. In brief, we analyze the global situation in the moment and give the priority of the problem to be improved by the less developed countries and then know the gravity of the Aid for Trade and the trend of development.

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1. Introduction

In 2005, Ministerial Declaration held in Hong Kong clearly put forward Aid for Trade and called for its expansion. “We seek to place developing countries’ needs and

interests at the heart of the Work Program adopted in this Declaration,” they said, “… We shall continue to make positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development. In this context, enhanced market access, balanced rules, and well-targeted, sustainably financed technical assistance and capacity-building programs have important roles to play.”

The aim of Aid for Trade should be kind of what ministers said above. As a matter of fact, it might be difficult for the developing countries, especially the least-developed to implement and benefit from WTO Agreements and effectively expand their trade without the assistance of building the supply-side capacity and trade-related infrastructure. Aid for Trade is an important supplement for Doha Development Agenda rather than an alternative that ends up Doha Development Agenda.

Since Aid for Trade became a prominent issue on the development agenda, in 2006, the WTO Task Force is assigned by the Director-General to formulate explicit strategies and specific aid activities in conformity with the strategy in close co-operation with the OECD. Meanwhile, the Director-General tries to find out an appropriate mechanism of Aid for Trade that is able to deal with the questions: which kind of aid should be deliver and in which form it delivers effectively, last but not least, which institutions supervise and responsible for the operation of the donor and transfer, with Members as well as with the IMF and World Bank.

Under the circumstance of trade, in order to find the key to questions mentioned above, the purpose of the donation related to the trading system should be unveiled. Besides the explicit reason that Aid for Trade favours the global world trade, a few purposes have been exploited and conceivably, these rationales promote and support the design of Aid for Trade mechanism. Obviously, the first one is the political driver that Aid for Trade, in the view of developed countries, will be an instrument to complete the schedule in the Doha Round. Namely, Aid for Trade is considered as a normal negotiating side payment during the WTO’s bargaining process that is necessary to ensure the Doha Round package result in an improvement for all developing countries. The conclusion is drawn that aid should be delivered directly to those countries that would have a net loss from the Doha Round so that Aid for Trade would remove the barriers that block the progress.

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The second rationale is that Aid for Trade should be paid as compensation. Some countries get from preference and agreement in some specific areas, which means that some losses generates at the same time for the developing countries. As the fact above, the Aid for Trade is designed as compensatory schemes to address specific categories of switching costs arising from changes to the world trading system with fulfillment of the agreement.

The third one is fairness in the general sense. As we all know, an ambitious Doha Round will distribute a significant gains to rich countries which will far outweigh than those to poor countries. Therefore Aid for trade is a mechanism of redistribution through which the unbalanced outcome will be leveled. Although these three rationales consider Aid for Trade as an exchange, there is no doubt that Aid for Trade will bring some merits in the whole trading system.

In 2007, there were three Aid for Trade regional reviews held in Africa, Asia and Pacific and the Caribbean, as well as a WTO Aid for Trade Global Review which brought together partner countries and donors, to take stock of what was happening on Aid for Trade. In 2009 the 2nd WTO Aid for Trade Global Review will take place. Issues surrounding global trade regulations and LDCs have gained a lot of media and policy attention thanks to the recently collapsed Doha Round of World Trade Organization (WTO) negotiations being termed a development round. During the WTO's Hong Kong Ministerial, it was agreed that LDCs could see 100 percent duty-free, quota-free access to U.S. markets if the round were completed. But analysis of the deal by NGOs found that the text of the proposed LDC deal had substantial loopholes that might make the offer less than the full 100 percent access, and could even erase some current duty-free access of LDCs to rich country markets. Dissatisfaction with these loopholes led some economists to call for a reworking of the Hong Kong deal.

Dr. Chiedu Osakwe, as of 2001 the Director, Technical Cooperation Division at the Secretariat of the WTO, and adviser to the Director-General on developing country matters, was appointed as the WTO Special Coordinator for the Least Developed Countries beginning in 1999. He worked closely with the five other agencies that together with the WTO constitute the Integrated Framework of action for the Least Developed Countries. They addressed issues of market access, special and differential treatment provisions for developing countries, participation of developing countries in the multilateral trading system, and development questions, especially the interests of developing countries in competition policy.

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of trading not only in terms of public but also the private part. For developing countries, the aid for trade will make the global commercial strategy with domestic development strategy. In addition, in the developing countries the participant related the trading and economics for example the enterprises and households will perform better during the operation of the global commercial, in particular, when something happens suddenly. After the strategy determined, the developing countries will also benefit from the aid for trade in the model establishment and setting the agreement and bargaining, fulfillment and finally the evaluation whether that the agreement is fair or not.

The policies related to the aid for trade will be taken into action in the domestic, local and international level. They consist actions, agreements and organizational structure where the trade will work efficiently and effectively, besides the reciprocal strategies where the trade will be dominant. In addition, the strategy involves a wide range of policies in order to make the trade liberalized as much as possible and keep the trade from bearing the reform. Furthermore, the policies widen and deepen the benefit by reducing the cost of the trade during the switching. On the other hand, the policies of aid for trade are to be established under the condition of the three broad developments.

The global financial and economic crisis

In the report of aid for trade to the General Council of the World Trade Organisation1 on February 3, 2009, Pascal Lamy, the WTO’s Director-General, called aid for trade an asset “which we must sustain and reinforce, particularly now that the crisis is hitting

hard many of the most vulnerable (WTO) members.” The aid for trade is, at the moment,

being talked when the global financial and economic crisis happened. In such situation, the developing countries suffered from the reducing profit from trading. The aid for trade plays a more and more important role when the crisis would appear to surge as the matter of the fact that the exports and imports are able to pull the developing countries out of the economic crisis, and in the meanwhile, the aid for trade will increase your budget which makes the donor countries and recipient countries increase the stress under economic crisis. Some consider that under the economic crisis, the aid would not work effectively as expected and the export would not improve the trade and economy. Therefore, the officials of the developing countries led OECD donor countries to agree

1_{WTO website (http://www.wto.org/english/thewto_e/gcounc_e/gcounc_e.htm ): The General Council is the} WTO’s highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The current chairperson is H.E. Mr. Shahid BASHIR (Pakistan).

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on an Aid Pledge (including aid for trade) as assistant to the OECD Trade Pledge of the late 1970’s.

Stagnation in the WTO Doha Round

The revolution of the aid for trade took place under the failure of the Doha Round when the members of the WTO were not able to make accordance on modalities and the debate broke down. In July 2008, the failure became obvious when a WTO Ministerial Conference is put forward in order to fulfill the purpose of the Doha Round by the end of the year. Despite the fact that the aid for trade was not separated from the Doha Round negotiation, it plays an important role in the trading performance. In addition the aid for trade is a major part of the Doha Development Agenda (DDA). Meanwhile, the predominating perspective is that the halt in the Doha Round would not make an impact on the further development on aid for trade. After the revolution, the aid for trade should be a complementary organization rather than an alternative of the Doha Development Round.

Prior experience with Aid for Trade

Last but not least, during the complementation, the important determinant should be considered is technical assistance that supports the trade. At the beginning, the aid for trade agenda was put forward in the Uruguay Round that was controlled under the General Agreement on Tariffs and Trade (GATT) from 1986 to 1994. The Doha Round was ended with a large gap between the capacity of the developing countries to make the new multilateral trading policies into action and the extent of the willingness of the developed countries to help developing countries satisfy the ambitious demands they encountered. The new form of Trade-Related Technical Assistance (TRTA) and Trade-Related Capacity-Building (TRCB) generate as the disagreement exists. For example, the Integrated Framework for Trade-Related Technical Assistance for the least developed countries and Joint Integrated Technical Assistance Program (JITAP) for a number of African countries. From the point view of the members in WTO, the financial aid in the pattern of the technical assistance to trade will relieve the stress of the developing countries as they considered that the WTO negotiations might affect them adversely and some supporters might spring up backed by impressive domestic band. The TRTA/TRCB agenda made progress although at the beginning the Doha Round broke down in November 2001. The current aid for trade program was proposed in the December 2005 during the WTO Ministerial Conference in Hong Kong. There are three achievements in the regional reviews that are significant to the aid for trade.

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They are established by the WTO with the collaboration with the regional banks and national government in Latin America, Asia and Africa in September/October 2007. On the basis of the previous effort, in November 2007, the WTO held the first Global Review on aid for trade, and after that, the second Global Review took place in July 2009 that the WTO supported.

Originally, the trade and development community was not born from the Aid for Trade. With the effort gained before and progress made previously, the aid for trade will focus on the development and control of the input and output in the aid for trade operation instead of the increasing perception and valuation of the demand, which is demonstrated at the OECD Policy Dialogue on aid for trade in Paris in November 2008. In addition, the top target in the Aid for Trade is to adopt the policies in order to make the global and regional and local integrate and make a relevant network that improves the trade and development.

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2. The development of aid for trade

In the aid for trade report 2013, it is indicated that since the aid for trade was launched in 2006, partner countries dominated in planning the activities and carrying out the actions with the new trade strategies suitable for the recipient countries instead of the donor countries. In terms of the domestic strategies, many developing countries have made a mainstreaming trading development strategy that has been accomplished with stable study of the trade chance and critical interference, comprehensive stakeholder engagement and coordinated action. It is obvious that the progress has been made in the planning and delivery of aid for trade, compared to the operation of 2009 and 2011 with that in the previous year. In addition during the operation the tangible improvement came into existence. However, there still exist some defects that make the practical trade strategies and make a good contribution of the resource and make an optimal consequence of the priority. In the questionnaire form the 80 partner countries, the responses indicate that the recipient countries still have a dominant right and commitment to improve the aid for trade. In order to make the aid for trade more effective, the emerging trade-related priorities should be set in the aid for trade. What’s more, the partner countries had a voice that the priorities would be lasted as well as the aid for trade support.

Trade facilitation, value chains and competitiveness are emerging as priorities for partner countries. According to the data, 31 countries which contain around 40 percent of all partner countries have made a development of domestic trade-related priority. The chart suggests that trade facilitation remains the top which prioritized by 18 countries. Moise and Sorescu have identified that the trade-related cost has been reduced by 14.5 percent with the improvement of trade-related information, simplification and harmonization of documents, streamlining of procedure and use of automated process, especially in the low-income countries. In addition, the top three priority terms contain value chains and competitiveness that have been chosen by 13 countries respectively. Practically, the value chains play an important role in the least developed countries since 2011. It is considered that the value chains are the most effect way to make the economic growth and public evolution. However, in the questionnaire in 2011, the responses indicated that trade facilitation stayed in the fifth position and value chains in the last position and there were only seven items in the ranking. Niger expressed that in the past, the supply-chain-side related problems, shortage of competitiveness and low infrastructure are the major obstacles in the aid for trade. But right now, in most developing countries, they have already been overcome. For instance, in the morocco report the economic infrastructure and trade policy and regulation stay

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7 on the top three in the ranking of the priority.

From the chart, it is obvious that the competitiveness is a significant factor which maximizes the profit of trade together with some other top priorities. The value chains expand the exports and imports in order to make the exports more competitive, if the trade barrier is overcome. The improvement of the business environment, accessible information and the reduction of the transport and energy facilitate the extra investment. Although the trade facilitation and value chains have come up, in some countries there’s nothing changed. For example, the export diversification, infrastructure, and trade policy and regulations are still the main factors considered most important in the operation of trading. Furthermore the adjustment cost and WTO accession costs have not been noticed by the partner countries.

FIGURE 2-1 NEW AID-FOR-TRADE PRIORITIES

SOURCE:QUESTIONNAIRE OF PARTNER COUNTRIES 2013 BY OECD

If partner countries change the aid for trade priorities, the trade in the very country will be pushed by their new strategy. From the case, there are 24 out of 31 partner countries that have changed their trade-related priorities. The Dominican Republic countries are taken as example where in the beginning of 2011, the new domestic strategy has been set for the year of 2030. Another example is that Gambia established the Program for Accelerated Growth and Employment (PAGE) in 2011 and the National Export Strategy (NES) in 2012. The value chains and trade facilitation are considered most important factor that improve the countries in the trading and economy by the PAGE and the NES. In addition, the new Diagnostic Trade Integration Study (DTIS) for Gambia put an emphasis on the development of the value chains, especially for the small and medium-sized enterprises.

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FIGURE 2-2AID FOR TRADE FROM ODA BY INCOME GROUP

SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD

In general, the amount of aid for trade has been increasing from the baseline (year 2002). The majority aid is delivered to least developed countries and least/middle income countries. After 2010, the speed of aid growth in countries of these two types became slow while that in upper middle income countries was faster.

FIGURE 2-3AID FOR TRADE BY AREA FROM ODA(2011) SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD 0 2000 4000 6000 8000 10000 12000 14000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LDCs OLICs LMICs UMICs

Africa 32% America 8% Asia 45% Europe 13% Oceania 2%

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FIGURE 2-4GROWTH OF AID FOR TRADE BY AREA

According to the chart, Asia is the largest aid for trade recipient region which has been donated with USD 17 billion. Africa, in the past years, has received a large amount of aid for trade with a rapid growth. But in the latest year the amount fell down to USD 13.1 billion. It is relatively stable in other regions with a small amount, and at the same time the European area increases. Although the amount in the Asia area is relevantly higher than that in others, the fluctuation is also greater than any others. The amount fell down to USD 39 million in 2011, while in Europe flows surged to USD 35 million compared to the previous years. The amount in the Oceania dropped down by round USD 40 million to USD 6 million in 2011. On the contrary, the amount in 2010 reached USD 40 million of the EU commitment when a project called ‘strengthen Pacific economic integration through trade’ was put forward.

China and India got the largest part of non-concessional support that doubled ODA-like assistance in 2011 to USD 2.4 billion and USD 730 million respectively. The aid for trade of the South-South program boosted as an accompaniment in the aid for trade. India is the largest recipient with USD 11 billion which attains the 6.4 percent share of the total aid for trade.

In the second position is Viet Nam that got more than USD 9 billion (containing the 5.3 percent of total aid for trade) and after that the Afghanistan benefited USD 8.2 billion (involving the 4.7 percent of total aid for trade).

Germany financed the 72 percent of all regional programs in the Americas with USD 47.6 million to enhance the regional financial institutions and USD 25 million to improve regional energy supply.

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Africa America Asia Europe Oceania

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Australia funded USD 20 million (2013-2014) to the ASEAN Australia-New Zealand Free Trade Area (AANZFTA) Economic Cooperation Support Program (AECSP). The aid supported by Australia improves ASEAN member states’ exploiting their commitments under the AANZFTA and in the interest of broader trade liberalization and regional economic integration.

The regional programs in Asia (USD 336 million) and the Americas (USD 125.7 million) haven’t flourished until 2010 and compared to the baseline it more than tripled in regional area of Asia and an increase of 60.5 percent for the Americas. An amount of approximately USD 20 million was provided by EU to South-East Asia in order to support Association of Southeast Asian Nations (ASEAN) economic integration. At the same time, projects were designed to strengthen the institutional scheme to help the integration mentioned above.

Compared to 2002-2005 baselines, the global programs expanded rapidly, the aid for trade of which reached USD 45.9 billion. The largest global program including USD 572.5 million commitments from the Netherlands has been contributed to private sector investment so as to invest the developing countries. Pilot projects inspired investments in the emerging markets and made a trade connection with local companies in the emerging markets.

FIGURE 2-5TOTAL AMOUNT OF ODAAID FROM 2002 TO 2011 SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total ODA‐commitment Total ODA‐disbursement

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FIGURE 2-6TOTAL AMOUNT OF OOFAID FROM 2002 TO 2011 SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD

Disbursements suggested the past priorities. For instance, Iraq got USD 6.9 billion, mainly for post-war reconstruction. Therefore, the commitments to the country went down.

Aid-for-trade commitments increased from USD 19 billion in 1995 to USD 23 billion in 2005 and stood at USD 45.9 billion in 2011. The acceleration evident in the period 2006-10 seems to have tailed off somewhat from a peak of USD 44.9 billion in 2010 under the pressure of the global economic crisis. However, there can be little doubt that donor governments have invested heavily in building trade capacity. Concomitantly, trade from developing countries grew substantially and in an accelerating pattern not dissimilar to aid for trade over this same 1995-2011 period. Exports of developing countries rose from about USD 4 trillion to surpass USD 15 trillion. Since the onset of the economic crisis in 2008, donor budgets have come under increasing strain. This has raised the level of scrutiny of all expenditures, including development assistance, to show results. The OECD and WTO have worked intensively to analyze evidence on ways aid for trade has affected trade performance as a stimulus to economic growth and poverty reduction (OECD, 2011c).

In general terms, trade facilitation can be divided between investments in soft infrastructure and those in hard infrastructure. Soft infrastructure refers to institutional features such as trade policy, customs regulations, border crossings and the business environment. Hard infrastructure refers to physical infrastructure such as energy grids, ports, railways and roads.

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total OOF‐commitment Total OOF‐disbursement

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3. Who need Aid for Trade – (Case of Uganda)

There is no doubt that the objects of aid are the low-income countries without an integrated and effective value chain to compete with other counties in the international market. But if we want to know how the aid for trade helps partner countries or what the donors can do to help these countries, we must analyze the problems exist firstly and then act appropriately to the situation. In following, we take an example of Uganda – a typical least developed country – to see the effect of aid for trade.

The reason why we select Uganda as an object of the case study is that, firstly from the result, Uganda has taken a great success from the Aid for Trade. Therefore we would like to study experience of the success and find out a solution for other developing countries and least developed countries. In addition, we can get enough databases regarding to the Aid for Trade of Uganda, which means the study of Uganda case is accessible. And Uganda took part in many Aid for Trade program where in the following paragraphs, the finance assist, the soft investment and physical support, even the policy adjustment, have been made. Certainly, China and India also did a large variety of Aid for Trade and successfully. But compared to Uganda, they are much larger and have more resource. It is inferred that they can get out of poverty much faster than Uganda. Uganda needs more help than those ‘big’ countries.

Background

Uganda is a landlocked East African country where 33 million people habitat. It is bordered on the east by Kenya, on the north by South Sudan, on the west by the Democratic Republic of the Congo, on the southwest by Rwanda and on the south by Tanzania. Kenya, Tanzania and Rwanda are the three co-members of the East African Community. As the southern part of the country includes a substantial portion of Lake Victoria, Uganda enjoys a generally benign equatorial climate with adequate rainfall and fertile land, facilitating agriculture. It holds an estimated 2.3bn barrels of proved oil reserves located in Lake Albert. Agriculture accounts for 22% of GDP, services for 52%, and industry the remaining 26%, of which manufacturing constitutes 8%. Almost 70 percent of the working population are employed in agriculture, forestry and fishing. The population is both young and one of the fastest growing in the world. Moreover, Uganda is a Least Developed Country with GNI per capita of US$420. The nation is governed under relative political stability and has enjoyed a reprieve from violent civil conflict in its northern region.

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Population (thousands, 2007) 30930

GDP (USD m, current2007) 11214

GDP real growth rate (annual%, 2007) 7.9

GDP per capita, PPP (current international dollars, 2007) 939

Income group Least developed coun

try(LDC)

Poverty (% living below USD 1.25/day, 2005) 51.5

Income share held by highest 20% (%, 2003) 52.5

Women employed in non-agricultural sector (%, 2007) 39

Human development index (2006) 156/179

Aid dependency (ODA/GNI, 2006) 16.8

TABLE 3-1: BASIC INDICATORS OF UGANDA

SOURCE:WTO/OECD

Indicator 2005 2011

GDP growth (%) 6.3 6.7

Number of exporters 802 1384

Product export concentration (0 to 1) 0.08 0.06

Goods RTAs notified to the WTO n.a. 2

Services EIAs notified to the WTO n.a. 0

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Tariffs (%, 2006 and 2011)

Imports: simple avg. MFN applied 12.7 12.5

Imports: weighted avg. MFN applied 11.6 10.6

Exports: weighted avg. faced 1.1 0.2

Exports: duty free (value in %) 96.8 97.0

TABLE 3-2: TRADE INDICATORS OF UGANDA COMPARED BETWEEN 2005 AND 2011 SOURCE:WTO/OECD

FIGURE 3-1 TIME TO EXPORT AND IMPORT COMPARED TO LOW INCOME COUNTRIES AVERAGE IN 2005 AND 2011 SOURCE:WTO/OECD

From the tables and figure above, the situation of trade in Uganda has been improved much compared to 2005: the number of exporters increased 73%, and the time to export and import also reduced, especially the time to import which is only the half of that in 2005 and succeed the average level of the low income countries in 2011.

In the past twenty years, Uganda has grown increasingly in terms of economy with almost 7 percent annually GDP growth. Even in terms of social condition, in sub-Saharan Africa, Uganda has already improved a lot. The poverty has been reduced to 31 percent in 2005-2006 while in 1992-1993 it stayed 57 percent. Uganda is expected to classify the country that could get MDG 1 which means that it remove the extreme poverty and hunger. In spite of the falling down economy which definitely impacted negatively export demand, delivery and capital flow, the aid for trade kept Uganda from being influenced by global economic downturn. The dominant long-term structural

43 55 38 46 34 67 37 42 0 10 20 30 40 50 60 70 80 2011 2005 2011 2005 days Time to export Time to import Ugangda Low income countries

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target is to stimulate the GDP growth through the individual activities and various factors such as harmony and balance dividend of the late 1980s and mid-1990s, in addition, the aid financial consumption which led to sustainable export and investment. With a blooming labor force with 3.4 percent annual growth, the wage employment pattern brought about a large amount of working position.

What should the aid deliver for?

Uganda is the best practical example of aid for trade which apply the aid management policies and formulation of institutions that make sure that official aid finance are adequately exploited, the domestic interest are well protected and deal with the development problem, all of which above is evaluated by the aid for trade. As the general condition of Uganda that is a landlocked developing country where the automobile is considered significant for the transport, Uganda government make an explicit domestic strategy, overall policies and various action in order to improve the economic and social development. The analysis tried to assess the impact of aid for trade in Uganda from 2005 to 2010 in the view of the business sector and make the attention on the tangible and intangible influence of aid for trade. The important economic variables will be analyzed such as transport, energy, communications and productive capacity. As in the least developed country, the national small and medium-sized enterprises will be analyzed mainly compared to the global Ugandan enterprises.

In Uganda, the main problem block the trade is that poor infrastructure cripples local exporters. More than 50 percent of Ugandan roads are in poor condition placing a large burden on farmers. Increased transport costs associated with poor roads add the equivalent of an 80 percent tax on exported clothing. Most companies rely on generators to bridge periods of blackout and to avoid damage to equipment from power fluctuations. This is far less efficient than grid power. For example, the average generator installed by small-and medium-sized enterprises in Uganda costs about $25,000 to purchase and requires considerable on-going maintenance and fuel costs. Power generation can increase business start-up costs by more than 30 percent. For businesses in countries without decent infrastructure tariff barriers are inconsequential when compared to the costs imposed by domestic obstacles. EU commissioner Pascal Lamy acknowledged that "duty-free access alone is not enough to enable the poorest

countries to benefit from liberalized trade. We need to help them build their capacity to supply goods of export quality and we reaffirm the Commission's commitment to

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continued technical and financial assistance to this end" 2

Three arguments have been proposed according to the response gathered from the random sampling of parallel questionnaires. The first one is that what the most significant aspect that makes the export competitive is. Secondly, whether there has been a great progress in the same aspect in the past years. Finally, whether aid for trade, in particular trade support services, had a tangible influence on the business atmosphere and obstacles to trade.

The survey is basically designed to assess the effectiveness of aid for trade by connecting the effect of aid for trade and growing export performance in Uganda. It tried to put emphasis on what has been mentioned as the missing middle in the assessment of aid for trade, namely the connection between the export development programs and comprehensive payoff in terms of changes in domestic trade flows. There is an issue that suggests a positive correlation and afford the broker in order to get the knowledge well of the development needs and aid for trade priorities.

With the collaboration of stakeholders from the partner countries, the survey involved the exporting company and sector associations. In accordance with the guiding principle of country ownership, Uganda Export Promotion Board (UEPB) make the whole process of the analysis, for example establishment, control, participation and evaluation. What’s more, the survey includes the competence of control the effect of aid for trade. The UEPB prepared to make some further actions in order to analyze the result of aid for trade effect in depth on the development in Uganda. According to the promising result and experienced earned from all the reference, the approach of the study will be improved.

Despite the importance of these "behind the border" costs, aid for infrastructure has been falling for a decade. There is now recognition in development quarters that donor-supported public funding is an essential prerequisite for boosting or upgrading supply capacity and infrastructure building in LDCs. Improved infrastructure combines with strong macroeconomic conditions complements investment in supply capacity building and increases export competitiveness. The increased focus on infrastructure needs is reflected in the World Bank's plans to increase infrastructure lending by $1billion per year to around $10 billion by 2008 and the Gleneagles agreement by the G8 "to boost growth, attract new investment and contribute to Africa's capacity to trade" through the establishment of the Infrastructure Consortium for Africa, jointly

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supported by African countries and by the European Commission, G8, and key multilaterals.

However, in order to achieve trade related policy objectives, infrastructure improvements have to be coupled with good policies. Research indicates that returns to infrastructure projects can vary widely and are affected by the quality of the business environment. For example good roads and port facilities alone do not guarantee an expansion of trade. The value of infrastructure projects are easily eroded by poor economic policies or inefficient and corrupt customs services.

FIGURE 3-2AID FOR TRADE IN UGANDA BY TYPE (DISBURSEMENT) SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD

FIGURE 3-3AID FOR TRADE IN UGANDA BY SECTOR,2011

SOURCE:AID FOR TRADE STATISTICAL QUERIES BY OECD 0 100 200 300 400 500 600 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Economic infrastructure Building productive capacity Trade Policies & Regulations Total Transport & Storage 42% Communicatio ns 0% Energy 15% Banking & Financial Services 7% Business & Other Services 4% Agriculture 20% Forestry 1% Fishing 1% Industry 5% Mineral Resources & Mining 3% Tourism 0% Trade Policies & Regulations 2%

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From the chart of the sectoral distribution of aid for trade disbursements, it is unveiled that in 2011 the largest share was absorbed by transport and storage which contained the 42 percent, followed by energy which contained the 15 percent. In the third position, banking and financial services gained the 7 percent. As suggested above, this sectoral distribution of aid for trade will not be consistent with Uganda’s most critical supply-side bottlenecks, trade priorities or development needs – an issue to which we return in the main findings of the ITC survey on business perspectives. Although, for instance in Uganda, a high percentage of the aid for trade targeted at the agricultural sector as we have analyzed above, its effectiveness in terms of productive growth appears to have been curtailed by under-developed value chains, insufficient quality management, poor infrastructure and undependable regional networks.

Soft infrastructure investments

Some cases were not about specific trade facilitation project, but put the emphasis rather on surveys conducted to analyze such initiatives. The restrictions were recognized in Uganda by the World Customs Organization (WCO) Time Release Study (TRS) to clear customs procedures and give suggestions to optimize efficiency at the borders. In addition, the Collaborative Centre for Gender and Development (CCGD) in Kenya reported a project that studied the EAC customs protocol which tested its responsiveness to the needs of informal women cross-border traders. The survey was conducted about the condition of informal cross-border women traders between Uganda and Kenya and actions taken to stimulate women’s participation in trade. Time Release Study (TRS) was an instrument that analyzed the barrier and give advices in order to improve the custom organization. In Uganda, the WCO worked with TRS that got the information from the random responses of the questionnaires and surveys, to improve the import and export of Uganda trading.

The aid for trade in Uganda was spent on the infrastructure and simplification of customs procedures collaborated with some regional projects. The time to pass goods in border stations was evaluated shorter than that in inland stations such as airports, with an average of one day of clearance time at the former compared to five days at the latter. Goods exempt from duties took longer to clear than those which were dutiable. It suggested the reason for this counter-intuitive finding is that exempt goods are examined more closely than dutiable ones. From the chart below, it is obvious that the spent on the import and export have been cut a lot while the cost has risen, especially in the cost to export.

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FIGURE 3-4 LOGISTICS PERFORMANCE OF UGANDA AND LOW INCOME COUNTRIES

SOURCE:OECD/WTO

Trade facilitation improved the time in border station and got rid of the barrier of the transportation. The NCTA was set up to simplify customs procedures in order to improve the delivery of import and export since Uganda is a landlocked country as analyzed in the general condition. Compared with the time spent on port clearance in Northern Corridor, it took 24 hours for South Africa Corridor to do the transit, instead

43 55 38 46 34 67 37 42 0 10 20 30 40 50 60 70 80 2011 2005 2011 2005 days Time to export Time to import Ugangda Low income countries 2717 2266 2169 1833 3015 2945 2880 1050 0 500 1000 1500 2000 2500 3000 3500 2011 2005 2011 2005 Cost to export Cost to import Ugangda Low income countries 0 1 2 3 4 5 2010 2007

Logistics Performance Index

Ugangda Low income countries ←LOWEST SCORE HIGHEST SCORE→

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of 68 hours. Furthermore, some experts said that there is still room for improvement. The World Bank pointed the project in Mombasa, Kenya, to Kampala, Uganda that time have dropped from 15 days to 5 days which indicated the average vans can make three courses monthly along the corridor rather than one and half courses by improving transport usage and financial reduction. The farmers in Uganda benefited from the savings generated from a large amount of exports. However, study indicated that it is necessary to enlarge the capacity and make the operation more efficient in order to expand the export volume.

Building public and entrepreneurial capacities

The International Centre for Trade and Sustainable Development (ICTSD), supported by the United Kingdom’s Department for International Development (DFID), provided five countries, one of which is Uganda, with the technical assistance to conduct needs evaluation for fulfillment of IPRs beginning in 2007. The support made use of the WTO TRIPS Council invitation to propose the needs evaluation for possible donor finance. A farmers’ co-operative in Uganda delivered almost 15 tons of fresh fruits and vegetables to Denmark every week through its partnership with Solhjulet, a Danish organic produce retailer. Under the assist of UNCTAD and UNEP, the organic production programs have been sponsored in several countries in East Africa. In Uganda organic exports volumes has more than tripled in four years which reached USD 37 million in 2009-2010.

Some program exclusively focused on women so as to improve their involvement in the trade. For instance, the Ethical Fashion Program in Kenya and Uganda has created 7 000 jobs for women in marginalized communities. Some specific training was provided on exports, information technology. Enterprise Uganda, established with Norwegian help in 2001, dedicated its second phase of integrated business support to small and medium-sized entrepreneurs almost exclusively to women entrepreneurs. The project entailed training in business management for some 3832 women entrepreneurs, many of whom were located in rural sectors and had low levels of literacy. This training was often coupled with health education to deal with HIV/AIDs. Thanks to these efforts, the women-led enterprises saw sales increase by more than 50% in two years and 500 people were employed. Moreover, there are three programs for women’s permission where the Uganda Women Entrepreneurs Association Limited (UWEAL) stimulated more women’s participation in export practices. The case story notes that through technical capacity building, more than 50% of 150 women trained saw their sales increase and 20% formally registered a business. On average, women in cities improved their outcomes more than those in the countryside. Even so, the activities of Enterprise Uganda are unlikely to be sustained without continued public sector support.

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Strengthening the private sector and building entrepreneurial

capacities

With the developed of information and communication technology, Uganda conducted a firm survey where indicated that in spite of the existing obstacles to trade, the private sector had pointed a great progress in economic growth and physical infrastructure and information and communications technology over the last five years. Positive performance also covered the services sectors, where the capacity of Ugandan exporters improved and the value of their exports increased. It is suggested to strengthen the dialogue between development agencies and the private sector to enhance the positive effects of aid for trade initiatives. At the global level, ITC has devoted considerable energy to export promotion programs, including the development of a modular learning system for supply chain management for exporters. The program is now offered in more than 120 licensed partner institutions in 61 countries. More than 25000 people have taken the 18-module course. One of examples was a three-year partnership between Uganda’s African Organic and the Danish company, Solhjulet. African Organic is a farmers’ co-operative of 154 farmers, of whom about 120 are small-scale farmers. The partnership consists of technical capacity building as well as establishing standards such as “Fair for Life”. With ITC co-operation, Uganda has also included gender issues in its National Export Strategy. Another case story described three programs for women’s empowerment in which the Uganda Women Entrepreneurs Association Limited was involved: the CIDA-funded Access to International Markets for African Businesswomen; the Women in Business Investment Club; and Women in Business. The first phase of the Access program led to 120 women being trained on export practices, of which 20% went on to register a business formally, 50% indicated a readiness to export after the program, and 53% said their sales increased by at least 8%.

Health and safety standards

Getting specific food and safety standards might have had an access to a niche market a decade ago, but today it is becoming more mainstream, offering exporters that obey such standards the potential for significant growth and product differentiation. For example, certified-organic exports from Uganda generated a rise from USD 10 million in 2004-2005 to USD 37 million in 2009-2010. Developing organic sector helped Uganda not only to get the access to new markets with strict regulation but also protect the environment in developing countries and the least developed countries. The UN Environment Program (UNEP) handed over a project on the adoption of the East African Organic Products Standard (EAOPS) as the official standard for the organic agricultural products in the region. The development and adoption of this standard has assisted in promoting organic production in East Africa and has served as a model for

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Summary

In the past years, there was a great progress in Uganda which reflected not only in the social development and economic growth. After removal the barrier of the trade and constraints to the export, Uganda is to come true their target that is to arrive at the status of the middle-income with their domestic strategy in a period. Uganda grows faster considering the young labor force. Depended on volumes and situation of continuous increasing export and import, the GDP has pushed the increase of the employment and social chances. On the other hand, Ugandan exporters experienced the loss from the geographic weakness that the inland country is substantially restricted by the internal and external transportation, and it would be worse without the sufficient infrastructure. As the structure and domestic situation massively depends on the agricultural goods, the government has made a new quinquennial National Development Plan that gets rid of the grave bottlenecks and according to its own strength, makes a growing volume in the relative favoring sectors.

A large amount of aid for trade is donated to Uganda from the Official Development Assistance and various interests have been gotten from the large volume of aid for trade which exceeded the amount for the least developed countries and sub-Saharan Africa. In 2008, almost USD 317 million of aid for trade was spent on the economic infrastructure, while USD 150 million was donated to build productive capacities with the help of technical assistance. The study tried to assess the effect of the aid flows from the views of the Ugandan private sector on eliminating the domestic barrier, improving a favorable ambient for export and lift the performance of trading based on the domestic strategy. The study indicated that the significance of economic and physical infrastructure such as supply side, energy and information technology as the developing countries are aware of their importance. They facilitate the access to the international market. In addition, the study indicated barriers against customs efficiency and market access, most notably the existence of non-tariff measures in regional and global interactions that affect transaction costs and the competence to trade.

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FIGURE 3-5 EXPORT VALUE OF UGANDA IN 2005 AND 2008 SOURCE:ITC,OECD/DAC

FIGURE 3-6 SHARES OF SECTORS OF UGANDA IN AVERAGE FROM 2005 TO 2008 SOURCE:ITC,OECD/DAC

0 100 200 300 400 500 600 700 800 900 1000 export value (USD million 2005) export value (USD million 2008) 33% 31% 23% 4%3%3% 1% 1% 1% 0% agriculture, forestry transport energy banking, finance industry business supportenergy fishing communications minerals, mining tourism

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FIGURE 3-7 THE TREND OF AID FOR TRADE FROM 2005 TO 2008 SOURCE:ITC,OECD/DAC

FIGURE 3-8ASSOCIATIONS PROVIDING TRADE SUPPORT SERVICES

SOURCE:OECD

FIGURE 3-9 OMPANIES RECEIVING TRADE SUPPORT SERVICES

SOURCE:OECD 0 100 200 300 400 500 aid for trade received (USD million 2005) aid for trade received (USD million 2006) aid for trade received (USD million 2007) aid for trade received (USD million 2008) total goods total services total

0 5 10 15 20 access to trade and market… supply chain management production process and quality… markeing, promoting and branding facilitating access to trade finance no yes 0 20 40 60 80 100 access to trade and market… supply chain management production process and quality… markeing, promoting and branding facilitating access to trade finance no yes

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The study put an emphasis on the evaluation of the trade support services on the enrichment of the trade chances and in particular on the participants from the small and medium-sized entrepreneur. Observation of the chart above, the result illustrated a big difference between aid for trade flows geared towards productive capacities in Uganda and private sector awareness of these initiatives.

Compared with aid for trade directed at individual sectors with sectorial export growth, it is possible to infer that investments in structural features have helped enhance output and trade flows. The service sectors where three-quarters of aid for trade disbursements was transferred in 2008, both increased in export value in terms of transport and communications and expanded directly and indirectly the capacities of Ugandan exporters. The study demonstrated that private sector demand in Uganda for targeted assistance in trade support services clearly exists and that there is enough room to expand the impact of these services on productive capacities.

From the study, we can conclude an exploratory result that the effectiveness of aid for trade will be more apparent by the spread of information across the business sector regarding aid for trade initiatives. However, in the private sector, the awareness on the provision, capacity and potential interest of aid for trade is inadequate. Another point is that it would be good practice to promote greater dialogue between development agencies and the private sector, notably small enterprises and their affiliated organizations, on aid for trade strategies. Some suggestions were put forward to facilitate the strategy by mapping an effective results chain between aid for trade inputs and export performance.

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4. Properties of Aid for Trade

Aid for trade V.S. Aid for development:

Firstly, Aid for trade is not a sub-catalog or substitution of aid for development, but a supplement. Since the international market was unfair and aid for development did less for trade, the change of schema of the aid was very necessary. In a sense, independence of aid for trade could concentrate on international trade, and eliminate the unbalance agreement and protection policy for developed countries. Moreover, to keep the independence of aid for trade, the resources and programs must be divided by aid for development.

Country ownership

In the perspective of fulfillment of aid for trade, it is important for recipient countries to carry out ownership of the initiative. The ownership of the country was considered the most important priority which stands over the policies, agreement. In the Paris Declaration on Aid Effectiveness, the ownership of developing countries was set as a guide. It is assumed that the “package of assets” or “bundle of institutional arrangements” through which the aid for trade initiative seeks to integrate developing countries into international trade and the trading system better, should be put into effect under the aegis of recipient countries. This approach is also reflected in the Poverty Reduction Strategy Papers, which emphasize the importance of national development planning. The success of aid for trade therefore ultimately depends on recipient countries’ ability to put in place the preconditions for economic development, i.e. the right legislation, policies, institutions and infrastructure.

The project of aid for trade must respect the properties of partner countries. The introduction of aid should be useful to the development of recipients, instead of retarding the progress. And export promotion projects will be ineffective if it’s not tailored as the needs of the private sector. Moreover, technical assistance and government support must be ordered as a part of the local administrations' broader development plan. Donor countries must make sure that aid will be put emphasis on which the recipient makes the financial plan and program structure instead of exploiting the recipient controlled by donors.

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complements the recipient ownership as they are likely to help their own bureaucracies to take part in barging with donor countries when making some trade agreements in order to improve it. And now they do not stress the practical obstacles proposed by local agricultural producers, collaborators and enterprises. After the Cancun WTO meeting, developing countries consider that the technical assistance is not eager to push the development or they do not accept agreements where some plans or programs actually do not fit them in order to maintain the procedure and make in progress.

Relationship with broader development strategy

However, in the other hand, the project of aid for trade cannot violate the development strategies of donors and partner countries. To ensure the country ownership, aid for trade must be linked to the broader development and has coherence policy based on the development program. Since country ownership is very important to every country, all the projects must serve the long-term strategy of the country. Under this consideration, someone suggests a stand-alone mechanism to concentrate the aid which can manage the fund to coordinate different projects. But this kind of fund is hardly to introduce into broader development strategies. Because WTO doesn’t have the capacity to manage aid flows, the mechanism to do this job is Enhanced Integrated Framework3. To balance the effect and efficiency is one of the responsibilities of EIF. High-level coordination costs long time and cause the failure to guide the aid for trade strategies.

The mechanism can provide the commitment of the aid for trade from developed countries and give the promise to developing countries to ensure the aid resources. Not all the commitments can be realized into real aid for developing countries. The difference between commitment and disbursement always exists.

3The Integrated Framework (IF) was initially established in October 1997, at the High-Level

Meeting on LDCs' Trade Development held at the WTO. Joining the WTO were the IF's other core partner agencies: the International Monetary Fund (IMF), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Program (UNDP) and the World Bank.

A Task Force on an Enhanced Integrated Framework provided recommendations in 2006 which led to the current Enhanced Integrated Framework.

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. FIGURE 4-1 COMMITMENTS AND DISBURSEMENT OF AID FOR TRADE FROM ODA

It is critical that although there is an enforcement mechanism in the WTO attached in the liberalization elements of agreements, in reality, it has never been tried to make into force the commitment mentioned and contracted in the agreement. In addition, the WTO has no power to copy with the aid flows that actually are managed by some other international organizations. As the matter of fact, the barging power will be reduced in terms of developing countries as the commitment contributed by donors are talked in the WTO, while the complementation is not under the control of the WTO. It is suggested that the aid for trade set an organization to manage the aid flows.

Private sector

The private sector, in particular in the form of small and medium-sized enterprises (SMEs), is an engine of trade and growth in many developing countries. It is a prominent stakeholder in aid for trade from two perspectives. The first one is that the private sector is a major beneficiary of aid for trade activities. On the other hand, it is a key intermediary in making aid for trade effective.

This dual role of the private sector in aid for trade is summarized in Business Membership Organizations as its institutional backbone. In developing countries, BMOs are potential recipients of Aid for trade from donor countries and international organizations, while at the same time, if needed, acting as lobbyists, facilitators and multipliers or catalysts in this area and thus performing an ‘internal’ Aid for trade function within the respective country. They are thus important intermediaries between

0 20000 40000 60000 80000 100000 120000 140000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total (commitment) Total(disbursement)

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foreign donors and domestic recipients of Aid for trade, as well as between the public sector and private entrepreneurs and may in this way significantly contribute to securing local ownership of Aid for trade projects. In principle, BMO activities span the main stages of the Aid for trade exercise, i.e. needs assessment and diagnostics as well as implementation and evaluation of the effectiveness of implementation, and they cover the main kinds of capacity building such as human, institutional and infrastructural, on which Aid for trade concentrates.

Private business in developing countries is dominated by SMEs, which largely contribute to economic and social development. However, they often lack technological capacity and are too small and inadequately endowed with capital to compete on dynamic international markets. SMEs’ business entry, survival and expansion are challenged by the financial, bureaucratic and managerial obstacles imposed on them in many developing countries. Small and micro-enterprises with fewer than ten employees often operate outside the formal sector. The share of informal employment and production can be assumed to be major in many developing countries, and it is questionable if any of the funding or technical assistance provided to the private sector reaches the informal small SMEs and micro-enterprises. Thus, aiding the private sector and addressing this vast co-existence with a formal sector remains a complex challenge and requires cooperation between the private and public sector: entrepreneurship engaged in legitimate activity relies on the actions taken by developing countries’ governments to improve the policy framework and trading environment for individual firms and business associations. This includes a functional infrastructure, a trained work force and the reduction of regulatory hurdles (or rather, imparting skills for dealing with hurdles), including those on international markets. A precondition for private sector development is country ownership, as asserted by the International Trade Centre, a Geneva-based joint agency of the WTO and UNCTAD which mainly provides trade-related assistance concerning the private sector. Developing countries’ governments need to create a situation conducive to firm and household development. To create such a trade-enabling environment, some development and financing institutions have put in place private sector programs themselves. These include the World Bank with its programs for the private sector, covering areas such as the investment climate, public-private partnerships and work on support for SMEs. The Inter-American Development Bank provides long-term loans and guarantees for private enterprises. The African Development Bank which has a private sector development strategy to integrate private sector concerns in the bank’s operations as well as its own private sector department dealing with private sector lending. The Asian Development Bank extends lines of credit to public and private

Aid for trade

AID FOR TRADE

Table of Contents

STATISTICAL NOTES

AID

FO

R

TRADE

Abs

tr

act

AID

FO

R

TRADE

Abstract

1. Introduction

The global financial and economic crisis

Stagnation in the WTO Doha Round

Prior experience with Aid for Trade

2. The development of aid for trade

3. Who need Aid for Trade – (Case of Uganda)

Background

What should the aid deliver for?

Soft infrastructure investments

Logistics Performance Index

Building public and entrepreneurial capacities

Strengthening the private sector and building entrepreneurial

capacities

Health and safety standards

Summary

4. Properties of Aid for Trade

Aid for trade V.S. Aid for development:

Country ownership

Relationship with broader development strategy

Private sector