1 AID FOR TRADE IN AFRICA: Why Trade? Why AID? MOBILIZING AID FOR TRADE: FOCUS ON AFRICA Dar es Salaam, Tanzania John Page, Chief Economist Africa Region, World Bank October 2007

2 Outline: WHY TRADE? Making Growth Sustainable Creating an Export Push WHY AID? Africa can compete. But… High Indirect Costs Limit Competitiveness AID FOR TRADE Supporting Institutional and Policy Reform Investing in Infrastructure Reinforcing the Country Based Model

3 WHY TRADE? Making Growth Sustainable

4 Annual Change in Real per capita GDP % Forecast 2008 Source: World Bank Why trade? African per capita income is now increasing in tandem with other developing countries

5 Economic Performance is Becoming More Diverse Why trade?

6 THREE KEYS TO SUSTAINABILITY: Avoiding Growth Collapses Accelerating Productivity Growth Boosting Private Investment

7 WHY TRADE? CREATING AN EXPORT PUSH TO SUSTAIN GROWTH Export Performance Export Diversification

8 Exports are important … Creating an export push Source: IMF WEO database. Note: export shares are unweighted average.

9 …But are growing slowly… Creating an export push

10 …And are declining in importance for Africas top performers Creating an export push

11 Africas Share of World Trade is Falling Creating an export push

12 and Africas exports remain concentrated Source: World Bank World Trade Indicators Creating an export push

13 WHY AID? African Can Compete, But… High Indirect Cost Limit Competitiveness

14 Factory floor costs compare well with India & China Direct cost per male shirt Why Aid?

15 Faster Growing African Countries Are Diversifying Their Exports Source: World Bank World Trade Indicators Why Aid?

16 African firms are sharply disadvantaged relative to China due to higher indirect costs. *due to power losses, delivery delays, shipment losses, crime Why Aid?

17 Africa lags other regions in the cost of doing business … Data sources: World Bank Doing Business Database as of November *Normalized ranking from Doing Business ** Ranking from Doing Business Ease of doing business rank, Simple average by region Why Aid?

18 Access to electricity by region Data sources: The World Bank WDI database, April … And in access to infrastructure Building the private sector Why Aid?

19 The time to clear goods at port is several days in many countries in Africa Why Aid?

20 Subramanian (2006) Domestic Constraints Handicap African Firms In Global Supply Chain Industries Why Aid?

21 Alleviating domestic constraints could increase exports in African, particularly for manufactured products Why Aid?

22 AID FOR TRADE Supporting Institutional and Policy Reform Diagnostic work to identify key constraints Capacity Development Improving Policies at and Behind the Border Supporting effective Regional Organizations

23 AID FOR TRADE Investing in Infrastructure An Export Push Needs an Infrastructure Push Creating Space For The Private Sector Public Resources will Still Be Needed

24 AID FOR TRADE Reinforcing The Country Based Model Trade as a Development Issue Mainstreaming Trade in Poverty Reduction Strategies Scaling-up: Avoiding Vertical Programs