Transcript Document

UNCTAD Training course on key issues on the international
economic agenda, Belgrade, 18-21 September 2006
Foreign Trade and institutional
changes of countries in transition,
the experience of Serbia
Prof. Danica Popović
Faculty of Economics and CLDS
[email protected]
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Topic One: Where are we today?
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Champions from below...
Real GDP Percentage Change Index (1989 = Base), 1989-2004
Poland
EU
Slovenia
Hungary
Slovak
Czech R
Romania
Croatia
Bulgaria
Russia
Serbia
140
120
100
80
60
40
19
89
19
1
90 991
19
92
19
93
19
1
94 995
19
96
19
97
19
1
98 999
20
00
20
01
20
2
02 003
20
04
Mind the gap ...
$ bn
Serbia: exports, imports and foreign trade deficit, 19652005.
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9
7
5
3
1
-1
-3
-5
-7
-9
1965
imports
exports
resource gap
resource gap
1970
1975
1980
1985
1990
1995
2000
2005
4
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Trade and industrial output
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Debt crisis knocking on our door?
miliona USD
Public debt repayments, 2001-2010.
297
675
2004
656
745
1076
815
897
960
1065
interest
principal
2182
2609
2754
1034
1658
2005
2006
2007
2008
2009
2010
2001
2002
218
2003
total
107
183
451
972
1732
1779
2473
3079
3569
3819
interest
74
140
233
297
656
745
815
897
960
1065
principal
33
43
218
675
1076
1034
1658
2182
2609
2754
0
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Izvor: MMF, na dan 31.12 04. Iznos zavise od vrednosti kursa USD
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WHAT DO WE EXPORT
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WHAT THE SANCTIONS DID TO US
Table 2.1.2
DEGREE OF OPENNESS
(export and import of goods divided by GDP)
%
1995
1996
1997
1998
1999*
EXPORT SHARE
10.0
12.2
14.8
15.5
9.9
IMPORT SHARE
17.4
25.0
26.6
26.2
21.8
EX&IM
27.5
OF GOODS / GDP
37.2
41.3
41.7
31.7
FSO, estimated; without data for Kosovo and Metohia.
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EXPORTS AND IMPORTS SHARE IN GDP, 2005.
100
90
80
78
82
79 78
68 65
70
60
68
65
62
prirast
u 2004-5
54
48
50
39
40
30
16
20
uvoz
izvoz
10
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10
Belgija
Slovačka Mađarska Češka rep Bugarska
Srbija
“Extenuating” circumstances for
Serbian government




The sanction
The Hague tribunal
Kosovo
Montenegro





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Since 2000 e ach republic established its own tariff structures
(slashing and streamlining rates), causing some confusion in
trade between the two republics.
The average tariff rate assessed on imported goods was 9
percent in Serbia and 4 percent in Montenegro.
In August 2003, the two republics agreed to an Internal
Market and Trade Action Plan on harmonizing tariffs and excise
taxes to create a single market.
Harmonization has been achieved on 93 percent of products,
resulting in an average (outweighed) tariff rate of 7 percent.
Following the September 2004 EU decision to provide a “dualtrack” for SAM accession the rates for 56 agricultural products
tol be undetermined separately by each republic.
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IMPORT STRUCTURE
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WHY DO IMORTS RISE SO MUCH?
 Consumer goods - a consequence of the rise in
aggregate demand and the lack of high-quality (and
in some cases of any) domestic supply
 TV sets rose from $1.8 to $32 MIL,
 Air-conditioners from around $5 to $29.5 mil
 Washing machines from around $2.2 to $15 million
 Deep freezes from around $1.4 to nearly $11 million
 Stoves from $0.5 to around $9 million
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THE EXCHANGE RATE POLICY
 Floating – depreciation
 Winners: exporters and future workers
 Loosers: importers, pensioners, workers
with fixed earnings
 In order to be effective and boost
exports, depreciation must be hihger
than the inflation rate
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The Real Exchange Rate
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POLITICAL ECONOMY OF
 EXPORT-DRIVEN
 DEMAND-DRIVEN GROWTH?




WAGES
TARIFFS
FDI
CHOICE OF ANOTHER STRATEGY
 Therefore, one has to apply a completely
different strategy of economic growth, which will
be driven by exports, instead by domestic
demand, and the only precondition for such a
turnaround is to bring wages in line with labor
productivity.
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WAGES AND INDUSTRIAL OUTPUT
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ELSWHERE, WAGES GROW
SLOWER THAN GDP
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EXPORTS – HUNGARY and Serbia

40% of exports with 70.000
employees in 10 firms
1.
Philips
Magyarorsag
2. Nokia komarom
3. GE Hungary
4. Samsung
Electronics
5. Electrolux
6. Siemens
nemzeti
7. Videoton
8. Sony Hungaria
9. Sanyo Hungary
10. Ericson
Magyarorsag
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Trade by destination and origin

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The choice of foreign trade policy
 Korean
 European model
 If you choose FDIs protection is
questoinable policy
 Why should we protect the best world
players
 What is protection?
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Trade by countries
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Export and import growth
 Export growth in the first half of 2006 over the
same period in 2005 stood at 18.9 percent (24
percent when calculated in the euro),
 Import grew in the same period by 23.6 percent
(28.9 percent when expressed in the euro).
 The more rapid rise in import over export
resulted in a higher foreign trade deficit in
Serbia of 27.5 percent (32.8 percent when
expressed in the euro).
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And volume
 Serbia's total foreign trade in the first
half of 2006 reached USD 8,301.6 million
or EUR 6,744.6 million, which was an
increase of 22 percent over the same
period in 2005 (a 27-percent growth
when expressed in the euro).
 Export was worth USD 2,508 million
(EUR 2,037 million)
 Import USD 5,793.5 million (EUR
4,707.5 million).
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TRADE POLICIES
 1986 – subsidies for
 Broomsticks
 Beehives
 Fireworks - arms
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Trade policies and institutions
 Reforms have included
 the elimination of import quotas,
 reduction of import licensing and
prohibitions,
 streamlining of customs procedures and
 reduction of tariff and non-tariff barriers.
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TRADE POLICIES
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FIRST LIBERAIZATION FRY
The degree of tariff protection
Non-weighted tariff rates
New
Previous Difference
9.48
14.43
-5.05
Weighted tariff rate
New
Previous Difference
8.09
9.71
-1.62
Source: Federal Statistical Office, mimeo.
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The rationale
Table 4.1.2.
The methodology of tariff protection
Tariff rates %
Products
1
Raw material and equipment not domestically produced
5
Raw materials domestically produced
10
Equipment domestically produced, consumers goods not domestically produced
20
Consumers articles domestically produced
30
Consumers articles domestically produced and luxurious articles
Source: Federal Government mimeo files
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Harmonization with Montenegro


Doomed to be a failure
The Federal Government carried out a comparatively fast and fairly good
initial liberalisation of foreign trade,








by abolishing the regulations on compulsory deposits for foreign trade
transactions,
on compulsory sales of foreign exchange to the National Bank of Yugoslavia,
on minimal opening capital of foreign trade enterprises,
on annual registration tax on business operations etc.
The first to be abolished were quotas, licences, approvals and other
restrictive measures that used to be in force.
This caused numerous protests and complaints, even after the concessions
made to the Zastava Automobile Works (which worked out the decision that
the duty on imported motorcars be set at 20% instead the of 10% that they
would have been entitled to according to the established methodology).
Concessions were also made to SARTID Steel Works, that is protected from
Russian dumping by import licences,
while export quotas on twelve products were retained in agriculture, to
prevent the goods from "escaping" into exports due to depressed local
prices.
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Remaining obstacles
 Montenegro is not an obstacle any
more, but even before
 (16 February 2005: General Council
accepts separate applications from
Serbia and Montenegro)
 Monopoly of oil imports
___________
 Good thing – FTAs
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Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia,
Moldova and Romania. The agreement liberalizes at least 90 percent of
mutual trade by the end of 2008.
Previous FTAs signed with Hungary and the Slovak Republic were
abolished with these countries’ admission to the European Union in
May 2004.
In addition, a free trade agreement with Russia is fully active,offering
access to a market of 150 million people.
Goods originating from Serbia and exported to the EU customs area
are subject to preferential custom regimes. In 2000, the European
Commission introduced Autonomous Trade Measures for Serbia and
Montenegro. These measures permit exports to the EU without
customs and quantities restrictions for almost all products originating
from Serbia and Montenegro.
In addition, trade with Kosovo, which is under UN administration,
proceeds duty free, although goods are assessed relevant taxes. There
are transitional periods built into these FTAs for sensitive sectors,
meaning that the reduction of tariffs will be phased-out over an agreed
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period.
Foreign Direct Investments
in the Western Balkans, 1997- 2004
FDIs per capita and share in GDP
1777
2000
6,00%
3500
5,00%
1500
3000
2500
1000
Serbia
2000
3,00%
479
CRO
1500
4,00%
500
1000
252
256
350
1,00%
0
500
MAC
BIH
0,00%
ALB
ALB
0
1997 1998 1999 2000 2001 2002 2003 2004 2005
2,00%
BIH
CRO MAC Serbia
cumulative FDIper capita
FDI/GDP
Key determinants for attracting FDIs
68%
Market size
65%
Political stability
61%
GDP growth
58%
Institutional framework
57%
Profit repatriation
53%
Macroeconomic stability
49%
Market size
48%
Business climate
42%
Presence of competition
39%
Price/quality of labor
0%
Greenfield FDIs
can help...
10%
20%
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Izvor: FDI Confidence
Index, AT Kerney 2002
30%
40%
50%
60%
70%
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Trade Barriers
Serbia and Montenegro, in preparation for its efforts to initiate
its accession to the World Trade Organization (WTO), has
already made major trade policy reforms to bring practices in
full conformity with WTO requirements and eventual
membership in the European Union (EU).
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A handful of laws establish the legal basis for governing the
trade of goods in Serbia: Law on Foreign Trade Transactions
(FTT) (amended in 1999 and 2002), Law on Customs, Law on
Customs Tariffs, Decision on Classification of Goods on Regimes
of Exports and Imports. The FTT law, originally promulgated in
the early 1990s as a federal law, is a comprehensive law
addressing all aspects of foreign trade activities by or with
companies and individuals in Serbia. These laws also provide the
government with the authority to implement temporary
measures to regulate trade. The government has phased-out
quantitative restrictions although certain goods require a license
from the government. New laws are being promulgated to
improve the customs and trade regimes. The government is now
drafting a new Foreign Trade Law was adopted later in 2005.
A new Customs Law and Custom Administration Law were
implemented in January 2004. These laws were drafted with the
assistance of international advisors and is in compliance with
WTO, World Customs Organization and EU standards.
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 Investment climate
 Trade regulations and standards
 On the web
 http://danica.popovic.ekof.bg.ac.yu/UN
CTAD
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Further steps
 WTO accession Harmonization with
EU
 Choosing a strategy
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