TRADE AND DEVELOPMENT THEORY, PRACTICE, CAMBODIAS STORY Sven - - PowerPoint PPT Presentation

TRADE AND DEVELOPMENT THEORY, PRACTICE, CAMBODIA’S STORY

Sven Callebaut, Adviser Ministry of Commerce, RGC sven.cdadviser@gmail.com

OBJECTIVE

The session will explore the link between trade and development, and how trade has been able to reduce poverty and increase employment and revenue in Cambodia. It will also highlight the role of MoC in mainstreaming trade into the country’s development agenda

SESSION CONTENTS

• 1. Check your knowledge: Cambodia’s trade

patterns

• 2. The link between trade and development
• 3. Trade Policy and Development in Cambodia
• 4. Trade Mainstreaming

DEFINITIONS

• Trade ?

the act or process of buying, selling, or exchanging commodities, at either wholesale or retail

• Commerce ?

the buying and selling of goods, especially on a large scale, as between cities or nations, under legal, technical and regulatory condition

CAMBODIA TRADE PATTERNS

SECTION I

DO YOU KNOW YOUR COUNTRY’S TRADE PATTERNS ?

• What are Cambodia’s main exports ?
• What are Cambodia’s main imports ?
• What are the 2 main official export markets ?
• What are the 2 main unofficial export markets

?

• What are the 2 largest exported product by

Cambodia ?

• What is larger: Cambodia foreign trade or GDP

?

Recent Evolution of Foreign Trade

CAMBODIA’S TRADE BOTTLENECKS

• Regulatory / Fees
• Discrepancies in implementation
• Predictability
• Logistics
• Human Resources / Market knowledge
• Energy
• Access to finance

Main Causes of Trade Restrictiveness

68 53 60 43 9 10 13 14 9 10 6 7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cambodia Domestic Cambodia Foreign Domestic Ave EAP Foreign Ave EAP Others Road Transportation Aviation Maritime Express Delivery Movement of People Investments Customs

Source: World Bank, World Governance Indicators, 2012.

CAMBODIA’S TRADE STRENGTHS

• Physically in a very trade-dynamic region, in

an integration process

• LDC status means preferential market access,

but not forever

• Cheap labour
• Open economy and liberalized trade
• Strong donor engagement in trade sector

development

CAMBODIA’S RECENT TRADE PROGRESS

• Achievements include:

– WTO accession; – significant progress in reforming the legal framework for commercial activities; – computerization of customs and implementation of a risk management strategy. – On-going automation of key trade processes – High level of foreign direct investment (around 6 percent of GDP in recent years), continued export growth (23 percent per annum since 1998) – rapid deepening of the financial sector

TRADE AND DEVELOPMENT THEORIES

SECTION II

BACKGROUND: TRADE AND DEVELOPMENT

• Trade - an engine of economic growth (development).
• There are a number of channels through which trade affects development of a

country.

• Direct channels

– income and employment effects, – expenditure effects arising of price changes, and – effects on revenue (public goods and development activities)

• Indirect effects through

– increased economic growth; – increased investment; – technology acquisition and learning; – dynamic efficiency gains coming from specialization; and – increased capacity utilization (factor of production, resources, etc.).

Source: The Least Developed Countries Report 2004

TRADE DEVELOPMENT STRATEGIES

The main strategies for trade sector development are:

i. Mainstream trade in the national development agenda. ii. Enhance the supply side capacity of exportable goods and services by increasing their production and productivity. iii. Identify the emerging export potential products and develop their value chain. iv. Develop trade and transit related infrastructures. v. Carry out the export promotion measures and market access. vi. Protect and promote the export of traditional products vii. Carry on the institutional reform and human resources development. viii. Enhance the capacity of private sector institutions.

TRADE POLICY AND DEVELOPMENT

SECTION III

SOME BASIC POLICY QUESTIONS

• 1. What is your basic objective ?

· Freer trade (trade liberalization) · More trade (increased quantity of trade) · Better trade (increased quality of trade)

• 2. Freer trade = more trade = better trade ?
• 3. What is meant by better trade ?
• 4. What should be the focus of efforts to integrate trade

into development and poverty reduction strategies ?

• Exports of Goods and Services
• Imports of Goods and Services
• Both

BROAD RANGE OF ISSUES

Source: The Least Developed Countries Report 2004

Create the enabling macroeconomic environment, strengthen public agencies that support PSD Improve the regulatory frameworks and investment code to foster private sector growth. To enhance the infrastructural platform for PSD by encouraging private investment in infrastructure (PPI) Remove administrative barriers to business entry and

• peration

Creating greater opportunities for access to regional and international markets by businesses To unlock the growth potential of the Micro, Small and Medium scale enterprises

Policy Area Objective

Policy environment & institutions Regulations & laws Infrastructure Business facilitation & economic diversification Trade expansion Local empowerment

National Development Strategy and the Trade Policy Process

Support from Multilateral and Bilateral Donors

National Development Strategy

Trade Strategy

Government ministries and agencies

Trade Policy Process

Analysis Formulation of trade policy Negotiation Implementation

Civil Society Academia and Research Institutions Private Sector and Business Associations

Effective Participation in MTS

Negotiating and implementing agenda and capacities

Increased Trade and Investment

National and regional competitiveness agenda and capacities

Trade Policy mainstreamed in development

TRADE MAINSTREAMING

SECTION IV

WHY TRADE MAINSTREAMING?

• To effectively leverage the potential of trade for

poverty reduction

• Trade reform in isolation will not yield the expected

results

• Broader development framework provides the

anchor to decide on the design and sequence of particular trade reforms and complementary policies

MAINSTREAMING: A DEVELOPMENT APPROACH

• Within this approach the focus is identifying a

country's trade interests within the context of its development objectives, translating those trade interests into a set of trade objectives and identifying the trade policies (including trade liberalization) and non-trade policies which are required to achieve those objectives.

MAINSTREAMING

Possible Questions to Assess the Growth and Poverty Reduction Effects of Different Trade Policy Options

• In what products and sectors does the country have a comparative

advantage?

• What are the demand growth prospects of different products and sectors in

world markets?

• What is the magnitude of local value-added, externalities and potential for

learning associated with these products and sectors?

• What is the employment intensity of specific export activities and their

linkages with the rest of the economy? But the overarching issue is:

How do the different trade policy options relate to the overall development strategy?

Promote of agriculture sector Capacity building & HRD Private sector development and employment Development of Physical infrastructure

Good Governance

• 1. Improved productivity, diversification

& commercialization

• 2. Promote livestock farming & aqua-
• 3. Land reform, mines clearance & UXO
• 4. Sustainable management of national

resources.

• 1. Strengthening private sector &

promoting investment & business

• 2. Development of industry & SMEs
• 3. Development of labor market
• 4. Development of banking & financial

sector

• 1. Development of transport & urban

infrastructure

• 2. Water resource & irrigation system

management

• 3. Electricity power development
• 4. ICT development
• 1. Strengthening & enhancing education,

science & technology, &Technical training

• 2. Promotion of health & nutrition
• 3. Development of social protection system
• 4. Enhancing implementation population

policy & gender equity

1 2 3 4

Cambodia carried out a country diagnostic trade integration study (DTIS) in 2001

CAMBODIA’S 2007 TRADE INTEGRATION STRATEGY (DTIS 2007)

Second update of DTIS

• n 18 Feb 2014.

OTHER DIMENSION: INSTITUTIONAL FRAMEWORK

• Trade is a cross-cutting issue
• Trade ministry is usually weak
• Advocacy: Sharing of analytical work/evidence helps

with buy-in

• Broad participation critical for sustainability
• Strong involvement of line ministries is key:

agriculture; planning and finance, etc.

• Participation of private sector broadly understood:

producers, service providers

Role of MoC

• is the government ministry responsible for regulating

and promoting commerce and trade of Cambodia

• works both domestically and internationally, and

within the context of ASEAN, to create opportunities and a good working environment for producers and exporters.

• is reaching out to line ministries so trade becomes

part of the country’s development agenda (not only of MoC)

• Is MoC a line ministry ??

Gender Decentralization & Deconcentration Education Fisheries Food Security & Nutrition Forestry Agriculture & Water Health HIV/AID S Infrastructure & Regional Integration Land Legal & Judiciary Reform Mine Action Partnership & Harmonization Planning & Poverty Reduction

Private Sector Development

Public Administration Reform Public Financial Management

PSD-SC SSC-PPI SSC- SME SSC-TD- TRI Trade SWAp Implementation Committee (IC) 3 Trade SWAp Pillars Line Ministries & other Stakeholders

Government Donor Joint Technical Working Group Trade SWAp Institutional Arrangements

Private Sector Development Steering Committee (PSD-SC)

3 Trade SWAp Pillars

DICO - NIU

EIF Tier 1 EIF Tier 2

Line Ministries & other stakeholders

TDSP EIF

Private Sector Development Steering Committee, (PSD-SC) Chairman: Deputy PM KEAT Chhon Vice Chairman:

• Sr. Minister SUN Chanthol

Sub-Steering Committee On Small and Medium Enterprises, (SME-SSC) Chairman:

• Sr. Minister CHAM Prasidh

Ministry of Industry & Handicraft Sub-Steering Committee On Investment Climate And Private Participation In Infrastructure (PPI-SSC) Chairman: Deputy PM KEAT Chhon Ministry of Economics & Finance Sub-Steering Committee On Trade Development & Trade-Related Investments, (SSC-TD-TRI) Chairman:

• Sr. Minister SUN Chanthol

Ministry of Commerce

IC (Implementation Committee)

• Trade mainstreaming is joint responsibility
• Paris principles of country ownerships, and donors

alignment and harmonization

• Joint diagnostics, monitoring and evaluation, pooling
• f funding, etc.
• United Nations Development Assistance Frameworks

(UNDAFs)

OTHER DIMENSION: DIALOGUE WITH DONORS

Summary

Trade is an engine of economic growth, especially in Cambodia Trade plays a leverage role in Cambodia, and as such needs to be mainstreamed at 3 levels The role of MoC is critical in pushing the trade agenda forward, but it can’t work isolated Cambodia still dependent on donor funding and trade preferences, but trend is changing