Vishnu Bassant Deputy Director General Ministry of Finance and Economic Development Mauritius 2 October 2007
Trade liberalization has not made much progress because of the fear of the unknown The associated economic and social cost makes it politically difficult in the absence of firm financial commitments These costs are incurred immediately but benefits are obtained in the longer term
A change of mind sets to believe that freer trade really brings greater prosperity A comprehensive strategy harnessing trade as an engine of growth Embedding the national strategy in a regional context as a first step ( eg EPA negotiations, COMESA FTA or similar regional initiatives ) Technical support of the IFIs and RDBs to develop the strategy, estimate the costs and benefits and provide viable technical options to decision makers Endorsement of the strategy by development partners that will be required to provide the financial resources The strategy can be in National Development Plans, PRSPs or any document approved by Government
To unlock growth to attain the goals set, including MDGs, employment creation, poverty reduction, etc Require wider economic reforms such as: Improving public sector efficiency Enhancing industry global competitiveness Improving the business environment to attract investment and FDI to build productive capacity Designing “safety nets” to protect the welfare of citizens likely to be affected – EMPOWERMENT PROGRAMME Restructure sunset industries and support sunrise industries – ENTERPRISE PROGRAMME Develop Trade Related Infrastructure and Adjustment Measures –both the hard and soft areas
The economic and social costs of trade liberalization are high Costs are borne in the first few years while benefits accrue in the long term Hence for the AFT strategy to be politically feasible: Additional resources need to be mobilized on a sustainable and predictable basis Resources need to be frontloaded Delivery mechanism has to be flexible LDCs require AFT even more than MICs since they can only access IDA and ODA which are inadequate to fund such programmes. MICs can borrow from the market but to finance the economic and social costs this may not be viable Lack of donor commitment can lead to reversal of policies, a slow down in the pace of reforms or lead to regime change or social tensions
Bring their experience to support nationally owned programmes, including in their development At the heart of AFT is TRTA/CB but it is not sufficient It is also necessary to finance TRiF and TRAM Recycle low performing instruments to national and regional AFT strategies to provide additionality Better coordinate to ensure coherence and reduce the administrative burden on recipient countries Agree on the architecture of conditionalities that puts in place a framework for success Avoid creating vertical silos These could be achieved by having periodic development partners meetings to discuss AFT strategies and monitoring implementation.
Coming from a country that has an AFT-compliant programme, I can say with hind sight that: The Recipient questionnaire is a useful tool to test the state of preparedness of countries to embark on AFT strategies It puts the right questions but many countries may not yet have the right answers It requires vision and courage since reform is very painful It requires high-level expertise to design and estimate the costs and anticipated benefits IFIs to help in analytical and advisory work to design a programme acceptable to decision makers Must be implemented in the first year of mandate
Are countries prepared to take advantage of AFT to unlock growth through trade liberalisation? Are external partners prepared to address the legitimate concerns of developing countries on a predictable and sustainable basis? Can we collectively have a compact to test the hypothesis that freer trade brings greater prosperity? If yes let us use the time between now and the Global Review to take the required political decisions Canvass the BWI and G8 for the early operationalisation of AFT