The Financial Express

Aid for Trade - donors call the shots

| Updated: October 17, 2017 14:50:56

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Aid for Trade - donors call the shots

During the second week of this month, the World Trade Organisation (WTO) organised a three-day event to review the latest status of Aid for Trade (AfT). Titled 'Aid for Trade Global Review 2017', the event was participated by 1,500 attendees. A lot of debates and discussions also took place in Geneva to determine the impact of AfT and its future path. Though the event ended with a merry mood, some critical questions remained unattended. 
AfT was initiated as an outcome of the Hong Kong Ministerial Conference of the WTO in 2005. It is regarded as a tool to assist the developing and Least Developed Countries (LDCs) to improve their capacities in conducting trade. 
But, a grey area is there from the beginning as AfT is not very well defined. It is rather a part of regular aid or Official Development Assistance (ODA). Thus, a demand is also there for not mixing AfT with regular aid. Donor countries and agencies are also urged to provide funding under AfT in addition to their regular aid commitments.  In reality, in most of the cases, AfT has become part of existing aid programmes of the donors.
Donors, however, argue that trade-related assistance is always a part of overall aid, which often may lead to oversimplification of the subject. The four major components of AfT, as specified by the WTO, are: Trade policy and regulations, economic infrastructure, productive capacity building and trade-related adjustments.  
HIGH COMMITMENT, LOW DISBURSEMENT: A report titled 'Aid for Trade at a Glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development' was launched at the Geneva event. WTO, in association with the Organisation for Economic Cooperation and Development (OECD), prepared and released the report containing the latest status of AfT.
It showed that donors committed some $53.87 billion while the actual disbursement of AfT stood at $39.81 billion in 2015. Thus around 74 per cent of the committed aid was disbursed. Actually, a major portion of the disbursed amount was committed earlier. Nevertheless, the gap between disbursement and commitment has some implications which need to be reviewed carefully. It is not unlikely that stringent conditions may slow down the disbursement process. 
Again, the Enhanced Integrated Framework (EIF) is the dedicated mechanism for the LDCs to get AfT. At the EIF Phase-II Pledging Conference in 2015, EIF Donors pledged US$90 million. Out of this, US$70 million have already been committed, with US$27 million disbursed to the EIF Trust Fund so far. The amount is not only inadequate, but also disappointing. It further appears that donors are more comfortable with bilateral relationships while disbursing trade-related aid.   
Among the LDCs, Bangladesh is the highest recipient of AfT and seventh highest recipient among the 146 developing and least developed countries in 2015. The country received $910.10 million as AfT in 2015 while average inflow of AfT was $824 million during 2012-14 period and $353.6 million during 2006-08. Thus, Aft increased by 142 per cent during last 10 years and 10.45 per cent in two years. 
India received the highest amount of AfT worth $ 3,085.6 million in 2015. Turkey, Viet Nam, Pakistan, Morocco and Kenya were the second, third, fourth, fifth and sixth highest recipients of AfT in 2015 respectively. Globally, some $39, 815.5 million were disbursed as AfT in 2015 of which top 20 recipient countries got $ 20,483.30 million or 51.4 per cent of the totally disbursed amount. 
Again, Bangladesh received the third highest amount of AfT commitment in 2015. The amount was $2,424.30 million while actual disbursement stood at $910.10 million. India received the highest amount of AfT commitment worth $2,804.8 million in 2015 followed by the Philippines which received the commitment worth $ 2,648.9 million. 
BOOSTING TRADE: How effective the AfT is for boosting trade of the developing countries, especially the LDCs, is a critical question. The latest review report indicates that AfT is contributing significantly to enhance the trade capacity of the developing countries.
Nevertheless, the proposition is not very strongly validated. For instance, LDCs' share is still 1.0 per cent of the global trade while that of the developing countries was around 45 per cent in 2015, a surge by 30 per cent from 2000.  Trade liberalisation and other policy reforms contributed significantly for enhancement of the trade of these countries.  Contribution of AfT is not well established in many cases.
In fact, determining the real contribution of AfT needs thorough exercise.  Some researches in this regard have already suggested that LDCs need more AfT with relaxed conditions. The existing volume of AfT is not sufficient. According to World Bank statistics, in 2015, the total value of net Official Development Assistance (ODA) and official aid stood at $152.51 billion. Thus, AfT stood around 26.10 per cent of the total aid flow in 2015.
The effectiveness of AfT actually depends on programmes designed to support trade-related endeavours. Funding should, therefore, be based on needs of the recipients. Accordingly, WTO has also set a recipient-driven mechanism for AfT, but the multilateral trade body has little influence over the donors as regards their aid policies and decisions.   
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