Towards the Global Review on Aid for Trade 2009: Issues and State of

Implementation in Africa

Towards the Global Review on Aid for Trade 2009: Issues and State of

Implementation in Africa

E c o n o m i c C o m m i s s i o n f o r A f r i c a

Does Supply Meet Demand

Stephen N. Karingi, United Nations Economic Commission for Africa

AfT Pivotal to Africa’s Development - RecapAfT Pivotal to Africa’s Development - Recap

Why is AfT important to African countries?Why is AfT important to African countries?

To fully benefit from international trade reforms ( WTO negotiations, EPAs with EC, etc)

To address the continent’s major trade constraints (high trade costs, weak trade-related institutions, poor infrastructure, uncompetitive productive capacities, export concentration, commodity-export dependency, etc)

To foster regional integration To contribute to the MDGs (reports show that

many African countries, in particular LDCs, are lagging behind)

To fully benefit from international trade reforms ( WTO negotiations, EPAs with EC, etc)

To address the continent’s major trade constraints (high trade costs, weak trade-related institutions, poor infrastructure, uncompetitive productive capacities, export concentration, commodity-export dependency, etc)

To foster regional integration To contribute to the MDGs (reports show that

many African countries, in particular LDCs, are lagging behind)

AfT can improve Africa’s trade performance trend

AfT can improve Africa’s trade performance trend

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Africa's share of w orld trade Africa's share of w orld exports

Africa’s Share of World Trade ( Exp+Imp %)

Source: WTO (2008)

Through improved competitiveness via lower

costs

Through improved competitiveness via lower

costs Better infrastructure can reduce transport

costs. By some estimates: For coastal countries by at least 40% and for

landlocked ones by 60%. This raises competitiveness. It has been

shown that a 10% rise in transport costs reduces trade volumes by up to 20%.

Improving trade facilitation by reducing time delays by 1 day can lead to at least 1% increase in trade.

Better infrastructure can reduce transport costs. By some estimates: For coastal countries by at least 40% and for

landlocked ones by 60%. This raises competitiveness. It has been

shown that a 10% rise in transport costs reduces trade volumes by up to 20%.

Improving trade facilitation by reducing time delays by 1 day can lead to at least 1% increase in trade.

The AfT monitoring framework

The AfT monitoring framework

Monitoring has been advocated to see whether flows meet right needs.

Monitoring will also help track progress in implementation.

Monitoring broken into three issues: The supply side. The demand side - resource use and trade

performance. Trade mainstreaming.

The indicators for monitoring are still being discussed.

Monitoring has been advocated to see whether flows meet right needs.

Monitoring will also help track progress in implementation.

Monitoring broken into three issues: The supply side. The demand side - resource use and trade

performance. Trade mainstreaming.

The indicators for monitoring are still being discussed.

AfT Supply To African Countries: a positive

trend?

AfT Supply To African Countries: a positive

trend?

2002 2003 2004 2005 2006

World

Total ODA: 65 90 98 123 127

Total AfT: 19 24 29 27 29

Afric

a

Total ODA: 22 32 35 42 51

Total AfT: 7 8 9 10 11

Total Non-AfT: 16 24 26 32 40

AfT flows, commitments current prices (US$ Billions)

Average Growth Rates for Africa (02-06):

-ODA: 23.5%

-AfT: 12.8%

-Non-AfT: 27.7%

It is important that Advocacy for AfT is not carried out to the detriment of other forms of Aid

AfT Supply to Africa: a positive trend?

AfT Supply to Africa: a positive trend?

Some patterns to highlight: AfT funds to Africa reached US$ 10.5bn in 2006,

over US$ 6.4bn to LDCs (33). At the regional level positive sustained growth,

but volatility at the country level. Although AfT shows a positive growth trend, the

share on total ODA to Africa has shrank to 21% in 2006 from 29% in 2002.

LDCs show a slowdown in 2005 and 2006 with AfT growth rates of 5.9% and 0.4%, well below the five years average.

Some patterns to highlight: AfT funds to Africa reached US$ 10.5bn in 2006,

over US$ 6.4bn to LDCs (33). At the regional level positive sustained growth,

but volatility at the country level. Although AfT shows a positive growth trend, the

share on total ODA to Africa has shrank to 21% in 2006 from 29% in 2002.

LDCs show a slowdown in 2005 and 2006 with AfT growth rates of 5.9% and 0.4%, well below the five years average.

AfT Supply to African LDCs: a positive trend

AfT Supply to African LDCs: a positive trend

2002 2003 2004 2005 2006

Total AfT to LDCs:

3,931 4,976 6,091 6,453 6,479

Total AfT to non-LDCs:

2,608 2,653 2,946 3,081 4,080

Africa’s Total AfT flow:

6,540 7,630 9,037 9,535 10,560

AfT to LDCs growth rates(%):

- 26.58 22.40 5.94 0.40

Share AfT to LDCs on Total

AfT(%):

60 65 67 68 61

AfT flows to LDCs not at the detriment of non-LDCs

AfT Supply to Africa: 2002-2006 aggregate top

recipients

AfT Supply to Africa: 2002-2006 aggregate top

recipientsAfrican selected Economies

Economic Infrastructure

Building Productive Capacities

Trade Policy and Regulations

Trade-related adjustments

1 Tanzania 636 738 9 3,018

2 Ethiopia 1,617 776 6 809

3 Mozambique 758 549 7 1,369

4 Egypt 748 1,432 441 29

5 Ghana 470 552 14 1,417

6 Uganda 401 484 1 1,252

Africa’s Total AfT by WTO Category

14,135 12,932 1,087 15,150

2002-2006 Aggregate flows, current prices (US$ millions)

For the period 2002-2006 Africa received more than US$ 43bn according to the AfT OECD purpose codes

Any results!?

AfT Supply to Africa: 2002-2006

AfT Supply to Africa: 2002-2006

2002-2006 Total AfT to African Countries: US$ 43bn.

Trade-related adjustment accounts for US$ 15.1bn, 35% share on total AfT received, however a trade-related interpretation of the above WTO category is challenging (proxy used is General Budget Support of CRS of OECD, very, very broad).

Economic infrastructure accounts for roughly over US$ 14.1bn, share of approx. 33% of total AfT received. Up-grade and maintenance of infrastructure is a priority concern for African LDCs (although some infrastructure projects accounted in the WTO category may not be strictly linked to trade issues, however good proxy).

2002-2006 Total AfT to African Countries: US$ 43bn.

Trade-related adjustment accounts for US$ 15.1bn, 35% share on total AfT received, however a trade-related interpretation of the above WTO category is challenging (proxy used is General Budget Support of CRS of OECD, very, very broad).

Economic infrastructure accounts for roughly over US$ 14.1bn, share of approx. 33% of total AfT received. Up-grade and maintenance of infrastructure is a priority concern for African LDCs (although some infrastructure projects accounted in the WTO category may not be strictly linked to trade issues, however good proxy).

AfT Supply to African LDCs: 2002-2006

AfT Supply to African LDCs: 2002-2006

Building productive capacities accounted for a total amount of roughly US$ 12.9bn with a share of 30% ( not surprisingly a large bulk of such projects are related to the agricultural sector).

Trade policy & regulations programs, such as training and trade facilitation account for a negligible amount of US$ 1bn (trade facilitation, training, policy reform support, etc).

Building productive capacities accounted for a total amount of roughly US$ 12.9bn with a share of 30% ( not surprisingly a large bulk of such projects are related to the agricultural sector).

Trade policy & regulations programs, such as training and trade facilitation account for a negligible amount of US$ 1bn (trade facilitation, training, policy reform support, etc).

AfT Supply to African LDCs: Issues

AfT Supply to African LDCs: Issues

Disparities in AfT per capita for African countries are huge (range for the period 2002-2006 goes from US$ 42 of Sao Tome & Principe down to US$ 0.5 of Somalia).

Volatility of AfT flows at the country level is also a matter of concern in terms of aid effectiveness (although some countries show more stable flows, SD is high for the large majority of African LDCs).

Disparities in AfT per capita for African countries are huge (range for the period 2002-2006 goes from US$ 42 of Sao Tome & Principe down to US$ 0.5 of Somalia).

Volatility of AfT flows at the country level is also a matter of concern in terms of aid effectiveness (although some countries show more stable flows, SD is high for the large majority of African LDCs).

AfT: The demand sideAfT: The demand side

The paper analyzes a few macro indicators as proposed by the WTO Task Force on AfT:

Logistics performance Index (WB)Trading Across Borders (WB/IFC)World Trade Indicators (WB)African Competitiveness Report (WEF)

The paper analyzes a few macro indicators as proposed by the WTO Task Force on AfT:

Logistics performance Index (WB)Trading Across Borders (WB/IFC)World Trade Indicators (WB)African Competitiveness Report (WEF)

The demand side of AfT: LPI (1)The demand side of AfT: LPI (1)

LPI sub-indexes No of countries

Customs 9

Infrastructure 20

International Shipment 3

Logistics Competence 8

Tracking & Tracing 9

Domestic Logistics Costs 1

Timeliness 0

Worst performances by LPI Sub-Indexes:

Source: World Bank (2008)

The demand side of AfT: LPI at the RECs level (2)

The demand side of AfT: LPI at the RECs level (2)

CEMAC 2.36 2.33 2.10

ECOWAS 2.30 2.11 2.07

COMESA 2.30 2.11 2.09

SADC 2.40 2.30 2.23

REC Int. LPI Customs Infrastructure

UMA 2.46 2.26 2.30

Sub-Saharan Africa 2.35 2.21 2.11

Source: World Bank (2008)

The demand side of AfT: Export Concentration Index (3)

The demand side of AfT: Export Concentration Index (3)

Export Concentration: Trend by REC

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2002 2003 2004 2005 2006

Source: World Bank (2008)

Exp

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Con

cent

rati

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ndex

COMESA ECOWAS SADC CEMAC UMA

5 years may not allow to make trend considerations but intuitively you can see that African countries are not moving towards diversification

Does supply meet demand?: quintile ranks (1)

Does supply meet demand?: quintile ranks (1)

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Central African Republic Somalia

Niger Sierra Leone

Rw anda Guinea-Bissau

Eritrea Chad

Comoros Burkina Faso

Burundi Zimbabw e

Malaw i Mali

Ethiopia Benin

Liberia Algeria

Congo, Dem. Rep. Sudan

Botsw ana Sao Tome and Principe

Gabon Cameroon

Lesotho Djibouti

Togo Zambia

Congo, Rep. Seychelles

Madagascar Guinea Nigeria

Cote d'Ivoire Cape Verde

Namibia Senegal

Gambia, The Angola

Sw aziland Mauritania

Uganda Tanzania

Egypt, Arab Rep. Mozambique

Mauritius Equatorial Guinea

Ghana Kenya Libya

Morocco South Africa

Tunisia

Quintile Ranking based on a selection of macro indicators as proposed by WTO (2008)

Worst performers:

1 CAR

2 Somalia

3 Niger

4 Sierra Leone

5 Rwanda

6 Guinea-Bissau

7 Eritrea

Does supply meet demand? AfT to GDP ratio (2)

Does supply meet demand? AfT to GDP ratio (2)

Among the group of countries receiving less AfT as a ratio to GDP as per regression line:

Somalia, Democratic Republic of Congo, Zimbabwe, Eritrea, Chad, Sudan, etc.

Does supply meet demand?: AfT per capita (3)

Does supply meet demand?: AfT per capita (3)

Correlation is negative and close to zero, suggesting a very weak relation between supply in per capita terms and potential demand

ConclusionConclusion

ODA-shifting from non-AfT to AfT not obvious.

Non-LDCs have not been discriminated in favour of LDCs.

AfT to non-LDCs grown at faster rate than that to LDCs.

There is evidence of AfT volatility. There is no apparent rational criteria for

AfT allocation among countries. Countries that are most deserving do not

necessarily receive the most.

ODA-shifting from non-AfT to AfT not obvious.

Non-LDCs have not been discriminated in favour of LDCs.

AfT to non-LDCs grown at faster rate than that to LDCs.

There is evidence of AfT volatility. There is no apparent rational criteria for

AfT allocation among countries. Countries that are most deserving do not

necessarily receive the most.

Some issues with monitoringSome issues with monitoring

Proxies for AfT WTO categories need further re-thinking and development to better address the reality of AfT flows (better accountability, better management of flows, etc).

More country and regional level case studies and microeconomic analyses on projects and programs are needed to complement macro data and contribute to better evaluations (link to country’s PRSPs).

AfT funds are only a part of the funds(maybe the most concessional) that reach Africa, so it must fit into broader considerations.

Proxies for AfT WTO categories need further re-thinking and development to better address the reality of AfT flows (better accountability, better management of flows, etc).

More country and regional level case studies and microeconomic analyses on projects and programs are needed to complement macro data and contribute to better evaluations (link to country’s PRSPs).

AfT funds are only a part of the funds(maybe the most concessional) that reach Africa, so it must fit into broader considerations.

Practical issues for discussion

Practical issues for discussion

1. What problems are countries and RECs facing in attracting AfT resources?

2. As we enter the 2nd Global Review process, what priority issues do African countries and RECs see as critical for them to benefit from AfT implementation?

3. What role(s) do African countries and RECs see for African regional organisations to help them address problems that limit their ability to attract AfT resources to match their demand?

1. What problems are countries and RECs facing in attracting AfT resources?

2. As we enter the 2nd Global Review process, what priority issues do African countries and RECs see as critical for them to benefit from AfT implementation?

3. What role(s) do African countries and RECs see for African regional organisations to help them address problems that limit their ability to attract AfT resources to match their demand?